CRE Survey Takes On Tough Issues

Article originally posted on Globe St. on March 12, 2019

Concerns over partisan politics. Cyberattacks. Investments in cannabis spaces. Opportunity Zones. Seyfarth Shaw’s 4th annual Real Estate Market Sentiment Survey examines all of these tough topics and their impact on the commercial real estate industry.

CANNABIS, A CAUTIONARY TALE

The majority of respondents to the survey, 85%, have no plans on investing in the cannabis industry in 2019.

“We still have a ways to go when it comes to a mass investment in the cannabis business,” says Ron Gart, a partner with Seyfarth Shaw. “Federal laws still have restrictions and the banks won’t make those loans thus complicating investment opportunities.”

Furthermore, 15% percent of respondents who plan to invest and engage in the cannabis industry indicated they would only make such an investment within 2-5 years and not sooner.

POLITICAL POWER SHIFT

With the political landscape recently shifting with the blue wave in House, President Trump faces a new power dynamic in Washington. This shift, however, doesn’t seem to bother half the industry as 53% believe the blue wave will have no impact on the industry.

According to the report, in 2017, over two-thirds of respondents believed that the Trump Administration would have a positive impact on the market and one-third named Donald Trump as the best presidential candidate for the industry in the firm’s inaugural survey back in 2016.

CO-WORKING

There appears to be some co-working confusion as 70% of commercial real estate executives report no increased investments in co-working spaces in 2019. Even with the explosive growth of this product over the last few years, these results raises more questions about the future of co-working.

“The results were surprisingly noncommittal. Maybe the respondents saw something the market hasn’t yet perceived. Maybe the market is saturated,” says Gart.

CYBER ATTACKS

“As for cyberattacks, they happen more than we know, specifically in the hospitality and real estate industry,” says Gart. “As news outlets report on significant cyberattacks on notable brand companies, the real estate industry is now aware of its vulnerabilities.”

OPPORTUNITY ZONES

Approximately 32% plan on taking advantage of the federal Opportunity Zone program as a sponsor or an investor in 2019. According to the report, of that group, 32% will utilize opportunity zones as a new source of investment capital, while another 25% plan to use the program as a way to defer current taxable gains.

“There are a lot of hope and expectations about these opportunity zones. The program is expected to be a win-win situation for developers, investors and municipalities. The intrigue, of course, will continue until its saturated,” says Gart.

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