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Industry Leaders Say Business Decisions on Hold Until After Elections

The ""Real Estate Roundtable's"":http://www.rer.org survey of 110 industry leaders on commercial real estate changed little quarter-over-quarter, possibly due to uncertainty over how the next administration will impact economic policies.

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On a scale of 1-100, the sentiment index overall inched up to 65 in Q4, a 2 point increase from Q3 and a 6 point gain from Q4 2011. The overall score combines the average of two separate indices measuring current and future conditions. The current conditions index was 68 for Q4, up 4 points from Q3, while the future conditions index remained unchanged at 62 for Q4.

Although respondents held a more positive view of the commercial real estate sector overall, industry leaders are acting cautiously.

""Everyone is deferring business and investment decisions until after the election because they don't know what's going to happen. There is even more uncertainty surrounding this election as candidates have such different ideas for economic policy,"" said one survey participant who was quoted in the report.

Another participant said, ""Companies are holding back to see what happens in the election. Dodd Frank and the fiscal cliff are also overarching concerns. We keep kicking the can down the road.""

Among the respondents, 66 percent in Q4 said commercial real estate market conditions were ""somewhat better"" or ""much better"" than one year ago compared to 60 percent in Q3. When making future projections, 51 percent expect the market to be ""somewhat better"" or ""much better"" one year from today compared to 56 percent in Q3.

One participant said, ""Slower growth is expected. Shocks from Washington's dysfunction are the most significant risk over the next 3-6 months.""

The Real Estate Roundtable's quarterly survey also measures executives' outlook on commercial real estate values.

Participants said they have seen an improvement in values and expect asset values to continue increasing.

In Q4, 51 percent of respondents said they expect values to be ""somewhat higher"" or ""much higher"" a year from now compared to 41 percent in Q3.
The Real Estate Roundtable report noted respondents cautioned the increases do not go beyond prime assets in core ""gateway"" commercial real estate markets.

One participant said, ""I would say prices are as high as they have ever been for the top tier assets with credit and long term leases. Assets with vacancies or those in suburban locales have continued to struggle a bit.""

The survey also showed an improvement in the availability of debt capital, with one respondent stating, ""If you have a good project (good property, good location) and have some credit, you can get good leverage and fairly easy capital. I am not saying companies should be too aggressive on new development, but rather they should leverage their current assets more.""

The Real Estate Roundtable brings together leaders in the real estate industry to address key national policy issues relating to real estate and the overall economy.

About Author: Esther Cho

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