September 2008 VOL. 2

Investment Notes

The Real Estate Roundtable's second Sentiment Survey found that the overwhelming majority of industry executives feel market conditions today are worse than they were 12 months ago and both debt and equity are less available today than 12 months ago.

The quarterly survey, conducted by FPL Advisory Group, measures executives’ current and future outlook on three topics including: overall real estate conditions; access to capital markets; and real estate asset pricing.

This quarter, the survey captured the thoughts of over 100 senior real estate executives including CEOs, presidents and board members. Surveyed executives very clearly stated that market conditions have deteriorated substantially in the past 12 months. Eighty-five percent say conditions are worse today in the real estate market than they were 12 months ago, while 63 percent say conditions are worse today for their companies.

Respondents continue to feel the pressure of weak capital markets. Ninety-five percent say access to debt financing is reduced – not one single person indicated that it was better. Moreover, 74 percent say access to equity capital is reduced.

Even more disturbing was the devaluation of real estate assets. Nearly eight out of 10 respondents say real estate property values are somewhat lower today than they were 12 months; another 16 percent say real estate property values are much lower today that a year ago. Additionally, the overwhelming majority of surveyed executives believe that commercial real estate asset prices will drop (49 percent) or stay flat (38 percent) in the next 12 months. Only 13 percent say prices will be higher.

Respondents’ hopes for even a mild improvement in market conditions in the coming year have dropped from 63 percent to 53 percent. Very few of those surveyed believe conditions will significantly improve in the coming year.