Nearly two out of three (63%) commercial real estate
executives surveyed by KPMG pushed back their expectations for a full U.S. economic recovery until 2014 or later.
Survey respondents said the CRE market continues to make strides in the right direction despite a lackluster economy. However, a slower than expected rate of growth and pricing pressures will likely result in more firms seeking to increase efficiencies and reduce costs over the next year.
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Nearly half (46%) of the real estate executives surveyed expect to spend the majority of their time and energy over the next two years on increasing operational efficiencies and reducing costs versus other initiatives.
"Expectations by commercial real estate executives for a modest but continuing sector recovery are closely aligned with their expectations for the U.S. economy as a whole," wrote Greg Williams, KPMG's national sector leader, building, construction & real estate in this year's annual survey. "This optimism is more subdued than last year’s assessments, when a larger portion of respondents hoped for a robust or even full recovery within a year or two. In 2012, it appears the real estate industry recognizes the full extent of the downturn, and expectations have been adjusted accordingly."
"Real estate executives in this year’s survey report that their companies are undertaking a number of well-considered and strategic initiatives to squeeze out unnecessary costs, improve efficiencies, and focus on organic growth to enhance their competitive posture," Williams wrote. "While increasing operational efficiencies and reducing costs will be a primary focus, there is also a tempered optimism exhibited by executives as industry fundamentals continue to slowly improve and bright spots emerge."
One such bright spot will be in the area of multifamily development, which is expected to see a significant spike in activity in 2013.
In addition, modest gains in hiring and revenue are expected to continue over the next year, further signaling positive momentum building within the industry, the survey found.
Other key highlights from the CRE executive surveys include the following:
- The top three areas where executives plan to increase spending over the next year include technology (52%), business acquisition (37%), and employee compensation and training (32%).
- More than two-thirds (72%) of respondents said improving real estate fundamentals will be the biggest growth driver over the next one to three years, representing a 22 percentage point increase in this category as compared to last year’s survey.
- Executives cite pricing pressures (35%), lack of customer demand (25%), access to and managing capital (24%), and regulatory and legislative pressures (21%) as the most significant barriers to growth.
- 56% of real estate executives surveyed said their company’s revenue has increased in the past year, while 67% anticipate continued revenue growth a year from now.
- 47% of survey respondents reported adding U.S. employees in the last 12 months, and 58% expect to add more in the next year. Meanwhile, 23% noted that their company’s U.S. headcount has already returned to prerecession levels.
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