Deloitte: 2014 Commercial Real Estate Outlook

From Deloitte:

In many ways, the commercial real estate (CRE) sector has experienced more good times than bad in recent years. It is looking to build on this momentum by exploring new sources of revenue and identifying ways to drive increased efficiency. For example, private equity firms’ success with buying and renting foreclosed single-family (SF) homes has driven the housing rebound in the U.S. and is leading to increased interest on their part to establish these properties as a new asset class for investment. Bank lenders are easing their standards, leading to increased CRE lending volumes and a rebound in commercial mortgage-backed securities (CMBS) issuance. Transaction activity and pricing are healthy for prime properties.

But challenges remain. The impact of regulations, such as Dodd-Frank, Terrorism Risk Insurance Act (TRIA), and Foreign Account Tax Compliance Act (FATCA) is still somewhat uncertain. Capital availability for construction activity and non-prime properties remains tight. Technology is becoming a driving force in a number of ways – from its impact on retail property owners through the rise of online shopping; to increases in mobile workforces and the resultant changes in demand for office space; and its influence through social media and mobility (again) on the potential talent shortage that may be looming for the sector. Successful firms will navigate these issues in order to capitalize on these changing drivers of growth.

We are pleased to share with you this outlook for 2014, the fifteenth publication in Deloitte’s series on critical issues affecting real estate, based on original research combined with the insights and first-hand experience of many of Deloitte’s leading real estate practitioners. Clearly, Deloitte is not alone in producing annual forecasts for the financial services industry. More often than not, these forecasts take the form of a list of trends, initiatives, or strategies. We were bothered by this “list-for-a-list’s-sake” approach and thought we could improve how we bring relevant, thoughtful content to our clients. Over the past year we have restructured our content into six major topical platforms, which are designed to explore both industry-wide competitive and market dynamics as well as examine tactical trends and opportunities within individual firms. Across nine segments of the financial services industry, our 2014 outlooks rely on this new structure and provide insights aligned to the following:

• Competition and markets – Evaluates existing industry structure, competitive landscape, or market composition
• Clients and products – Explores emerging trends in retail or institutional customer behaviors, attitudes, and needs amongst tenants and owners across real estate property types
• Governance, risk, and compliance – Reviews industry risk management practices and regulatory mandates and their potential financial and strategic impacts on industry participants
• Financial management – Highlights how finance leaders can better organize and deliver needed insights to their firms
• Organizational effectiveness – Analyzes how firms have responded to talent, process, and other operational challenges
• Technology dynamics – Examines the evolving role of technologies in the industry

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