Commercial real estate executives expect to see improvements in revenue and headcount next year, but the majority predict a full economic recovery is years away, according to a recent survey by KPMG LLP.
In the KPMG survey, 64 percent of the commercial real estate executives said their company’s current revenue is higher than last year, and 75% anticipate that their revenue will be higher one year from now.
The report also found that these executives are beginning to add headcount. Fifty-three percent said they plan to add personnel in the next year, compared to 13% seeing a decrease.
However, they are not predicting that hiring will significantly pick up anytime soon. When asked when they expect their company’s U.S. headcount to return to pre-recession levels, 27 percent said the end of 2013, 17 percent said the end of 2014 or later, and 11 percent said it would never return to pre-recession levels.
In addition, 57% do not expect a full economic recovery until the end of 2013 or later.
“Although real estate executives see things moving in the right direction, they believe it’s going to be some time before they see evidence to support higher levels of confidence,” said Greg Williams, national leader of KPMG LLP’s building, construction and real estate practice. “This is not surprising considering the status of current uncertain economic conditions and how hard this industry was hit by the downturn.
“The good news is that there has been an infusion of capital as institutional investors and others seeking an alternative to the public equity markets are investing in commercial real estate, especially in primary markets where we’re seeing prices at or near pre-recession values,” said Williams.
The executives also believe distressed real estate will remain a key industry issue.
According to the report, 66% of the respondents rate the marketplace for investment opportunities better than a year ago and 75% said distressed real estate would have an impact on their investment strategies over the next 12 months.
“For most commercial real estate executives, the fundamentals behind real estate demand remain a concern and this seems to indicate that prices in many markets may not have hit bottom yet,” said Williams. “Executives are struggling to find sectors and markets that can deliver a reasonable return on their investments commensurate with the risk involved.”
Despite these concerns, Williams noted that there are some bright spots with multi-family investment and development seen as gaining the most traction, since many remain hesitant about purchasing a home in the current economic environment.
In the KPMG survey, 34% of the executives said they expect a significant amount of multi-family development to commence next year, a much higher percentage than the office (22 percent), retail (20 percent), hospitality (19 percent), and industrial (17 percent) sectors.