McGladrey Commercial Real Estate Index Shows Conditions Continue to Improve
The 2Q2013 survey of Connecticut commercial real estate conditions indicates that aggregate measures are continuing to rise in tandem with a modestly improving economy. In fact, the most recent results represent the best reading three years of data and market tracking.
According to new survey results, the McGladrey Commercial Real Estate Index rose to a record level high of 28.3 in the second quarter, up from the index reading of 26.5 in the first quarter, representing a 7% quarter over quarter increase. The latest data is roughly six index points above the level realized one year ago.
“Despite the upward trend, the data are suggesting in strong terms that we have a way to go before the current commercial market could be considered fully recovered,” said Alissa DeJonge, director of research at CERC.
Nevertheless, according to Peter Gioia, vice president and economist at CBIA, “Aggregate measures within the commercial real estate sector encompassing Office, Industrial, Retail, and Investment real estate offer some clear optimism amidst a regional economic recovery, which continues to gain traction.”
New survey data also show that current conditions within the Connecticut commercial real estate market reached an index level of 25.3 in the second quarter, down from the level of 26.7 recorded in the first quarter. However, the Current Conditions Index component was higher than the level of 19.7 recorded one year ago.
Importantly, the Future Expectations Index component posted solid results in the second quarter, setting a new high with an index level of 31.3 as opposed to 26.3 last quarter, representing a rise of five index points. Relative to one year ago, future expectations were moderately higher, up roughly seven index points.
According to Don Klepper-Smith, Chief Economist with DataCore Partners LLC, “Recovery as of mid-2013 is becoming a bit more tangible and we're seeing improvement in key areas. That said, I think it bodes well for commercial real estate activity for the balance of the year. The survey results we have are the best on record, so there is a solid basis for optimism.”
“However, labor demand remains lackluster relative to prior economic recoveries as many area employers seem to be adopting a “wait and see” approach to permanent future hires given the continued sense of economic uncertainty.,” said Steven F. Kirn, CPA, Partner at McGladrey LLP.
Roughly 1 in 5 (21%) respondents thought that the state’s current economy was either “excellent” or “good” in the second quarter survey, while 19% labeled it as being "poor," and 60% said it was "fair."
Other findings include:
- Investment
Market: The environment for Connecticut investment real estate continues
to outperform relative to other commercial sectors as the overall economy
slowly improves as of the second quarter and profit margins remain
relatively healthy. As has been the case in the last several surveys,
investment real estate had the most favorable readings on “present
situation” and “future expectations.”
- Office
Market: Fundamentals surrounding the Connecticut office market are
improving because the state is now seeing growth in total non-farm jobs,
recovering almost half the jobs lost during the last recession.
- Industrial
Market: The state’s industrial market, which had been buoyed by healthy
export growth in recent years, is still facing pressures stemming from economic
weakness in the Eurozone.
- Retail
Market: Connecticut’s retail picture continues to be adversely affected by
just meager gain in the broadest measure of consumer spending power,
namely real disposable income, which is up fractionally thus far in 2013.
The most recent survey was conducted during the April-May 2013 timeframe and polled real estate professionals in all eight Connecticut counties, asking for opinions and perspective regarding local real estate conditions in both the residential and commercial markets. There were a total of 105 respondents who participated in the most recent survey, and included real estate brokers, real estate developers, bankers, appraisers, and economic development officials from around the state.
Download the executive summary of this quarter’s CT COMpREhensive and McGladrey Index...
About the McGladrey Commercial Real Estate Index
The McGladrey Commercial Real Estate Index is a diffusion index measuring the health of Connecticut’s commercial real estate market, assessing conditions within four key commercial real estate sectors: office, industrial, retail, and investment. The index is sponsored by McGladrey LLP, the nation’s leading provider of assurance, tax and consulting services focused on the middle market.
About CBIA
CBIA is Connecticut’s largest business organization, with 10,000 member companies. For more information, please contact Ann Marie C. Raymond (860.244.1957; annmarie.raymond@cbia.com) or visit cbia.com/newsroom.
About CERC
CERC is a public-private partnership that provides economic development services consistent with state strategies, leveraging Connecticut’s unique advantages as a premier business location. For more information, start here: www.cerc.com or visit us on LinkedIn, Facebook or Twitter (@CERCInc, @CERCSiteFinder or @CTBusinessInfo).
About DataCore Partners, LLC
DataCore Partners, LLC is a New Haven-based research firm headed by chief economist and director of research Don Klepper-Smith.
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