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 Overview · News Releases · Member News · Features · Media Backgrounder · CRE Logo and Graphics Standards No “White Knight” to the Rescue, But Reasons to be Optimistic Still Exist, Top Real Estate Executives Told at CRE Meeting FOR IMMEDIATE RELEASE - April 09, 2009 (Chicago, IL) April 9, 2009 – As investors, lenders and borrowers look for a timeline to real estate recovery, attendees at The Counselors of Real Estate (CRE) 2009 Midyear Meetings in New York City last week were told “no white knight to the rescue” should be expected. This reality check was presented by a panel of experts in capital markets and valuation of commercial properties, that included Robert M. White, CRE, president of Real Capital Analytics, Inc., Woody Heller, executive managing director and group head, Capital Transactions Group at Studley, Inc., and Brian Corcoran, CRE, executive vice president at Cushman & Wakefield. The panel was moderated by Meggan Walsh, CRE, managing director, Bank of Ireland. Despite prevailing statistics showing the U.S. and countries around the world are experiencing overall declines in both the economy and real estate value, optimism for the future emerged as a watchword in multiple featured sessions at this conference. The capital markets and valuation panelists concurred that declines in value are expected to average in the range of 30 – 40 percent before recovery, and that today the market has seen only a 10 – 20 percent decline in published data. White pointed out, however, that this decline has so far brought values back to 2005 levels, and to put the decline in perspective, a 40 percent drop would only return values to those seen earlier in this decade. Heller added to the reality check by telling audience members to “disregard the bubbles” when considering the state of real estate today. He pointed out that when investors disregard the “bubbles” of exuberance in the stock market and consider Dow Jones returns from 1929 – 1994, the approximate average return was five percent. He said the world has gotten used to huge returns that are not sustainable, but putting realistic expectations in place could return investors to optimism about the future of both the markets and real estate. Transaction volumes are expected to remain low until the spread between asking price and bids tightens and credit availability improves. Heller told the audience that because the economic slowdown is global, foreign investors are being cautious, distracted by economic issues at home, so not to expect immediate returns by “white knights to the rescue” from abroad. When asked if the U.S. Government’s Public Private Investment Partnership (PPIP) program will help the real estate industry, panelists agreed it is likely to help, but not to expect quick results. Corcoran said valuation issues are affecting more than commercial property sales. One example he used to illustrate the effect of declining value on the office sector showed that while value of one Park Avenue building in New York City dropped over 30 percent since June, 2007, office space leases – historically providing income from escalating rents – have dropped to near zero percent increase expectations for the next several years, and only a three percent increase thereafter. Walsh asked the panel to comment on the growth of troubled assets, presently growing at $6 to $8 billion per month. White said residential condominium and developers of new apartment/condo properties are currently experiencing the most difficulties with value correction, with retail and hotel sectors expected to be the next hardest hit. Panelists suggested optimism, however, fueled by the difference between the current economic cycle and past corrections in the commercial property sector. As supply and demand were close to equilibrium and construction pipelines were “less full” than prior cycles, panelists predicted that when capital flows resume to the commercial sector, recovery will be quicker than past real estate recoveries. The only remaining question left unanswered: “when”? The Counselors of Real Estate, established in 1953, is an international professional organization whose members, admitted by invitation, provide trusted and objective counsel on matters affecting all forms of real property in the United States and abroad. Only 1,200 of the world’s top real estate practitioners hold the CRE credential awarded by The Counselors of Real Estate » VIEW ALL NEWS RELEASES
The Counselors of Real Estate, established in 1953, is an international group of high profile professionals including members of prominent real estate, financial, legal and accounting firms as well as leaders of government and academia who provide expert, objective advice on complex real property situations and land-related matters. Membership is selective, extended by invitation only. The organization’s CRE (Counselor of Real Estate) Designation is awarded to all members in recognition of superior problem solving ability in various areas of real estate counseling. For more information, contact The Counselors of Real Estate, 430 N. Michigan Avenue, Chicago, IL 60611; 312/329.8427; http://www.cre.org
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