Commercial Property Investment Outlook – Jeff is Deloitte’s national real estate leader with nearly 30 years of audit and accounting experience. Throughout his career, Jeff has worked with public and private owners, developers, sponsors, managers and lenders in virtually all sectors of the real estate and hospitality industry. Jeff has significant experience with global and public REITs, in historical cost and fair value reporting, and in accounting for complex lease, contract and financing transactions, including debt restructuring and bankruptcy. He has assisted many public companies with SEC filings and led Deloitte’s efforts in many public equity and debt offerings, including initial public offerings. In addition to serving as a Principal Client Service Partner, Jeff is an engagement quality control reviewer for other large public and private clients. In this capacity, he independently confirms the quality and accuracy of the audit work performed by Deloitte teams. Previous leadership positions include Real Estate Head of Deloitte’s Central Region and Audit Head of the Chicago Office. Jeff received a BA in Government from the University of Notre Dame and an MS in Accounting from DePaul University. He is a member of NAREIT, ULI and ICSC.
Kathy is Deloitte’s Global Real Estate sector leader and an audit partner based in the Milwaukee office with over 20 years of experience. She serves as the primary client service partner for public and private clients in the Chicago and Milwaukee markets, with a focus on the real estate and hospitality sectors. She works with clients to provide attestation services and assist with technical accounting matters, including working through transactions such as mergers, acquisitions, divestitures and IPOs. Kathy currently serves as a University Advisory Partner on our University Relations team for the University of Wisconsin-Madison and serves on the Deloitte US Advisory Board for the current fiscal year.
Commercial Property Investment Outlook
Sally Ann is the West Region Real Estate Audit Lead and leads our global real estate audit practice as part of our Global Financial Services Audit Executive team. She is our National Real Estate Eminence Leader who works with our teams to deliver real estate excellence to the market. She has over 25 years of professional accountancy experience which includes starting her career as a Chartered Accountant in Ireland. Her experience includes providing extensive services to a number of major Deloitte clients with operations in the US and abroad. Her clients have included early stage companies, private and public REITs, real estate investment advisors, hotel operators, construction companies and developers. Sally Ann served as US real estate fund manager and also co-chair of accounting for the National Real Estate Investment Trust Board and Chair of the Reporting Standards Board for the NCREIF PREA Reporting Standards. As Chair of the Reporting Standards Board, she led several initiatives, including setting standards that affect valuations, performance measurement and financial reporting for investment funds. She regularly presents on issues facing real estate funds, including valuations, compliance, investor reporting issues. Sally Ann was involved in the AICPA’s Valuation Guide workgroup, which provided the perspective of real estate funds. She is a Fellow of the American Institute of Certified Public Accountants and a Fellow of the Institute of Chartered Accountants in Ireland.
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Tim is the commercial real estate industry research manager within the Center for Financial Services, based at 30 Rock in New York. Prior to Deloitte, he worked for over 5 years as a principal researcher for two of the leading commercial real estate agents, CBRE and Cushman & Wakefield.
Following a pandemic-induced course correction, the global real estate industry is facing transformative changes in how buildings will be used, valued and marketed in 2023 and beyond. Continued uncertainty in the global economy could further impact the industry. In the short term, the potential for regional or global recession or stagnation is looming – and this impact will be felt across all financial services sectors.
Deloitte surveyed 450 chief financial officers of major commercial real estate owners and investors to obtain their views on organizational growth and their plans for workforce, regulatory compliance and technology. We also asked about their investment priorities and expected structural changes in 2023.
Our research reveals the priorities that commercial real estate executives (CREs) can focus on to help their firms weather this period of uncertainty and emerge stronger. Real estate firms must make informed and innovative plans to meet the evolving needs of investors, tenants and regulators. Strategic portfolio execution, prioritization of environmental, social and governance (ESG) oversight to meet regulatory and stakeholder requirements, understanding recent and pending changes to tax structures, rethinking talent approaches and leveraging technology to innovated and improved efficiency to improve, stood out as the main priorities. when planning for a year that is hard to predict at the moment.
Uk & Channel Islands: Commercial Property Market Review And Outlook 2019
Concerns about the economy are top of mind for most global real estate leaders as they prepare for the rest of 2022 and 2023. Revenue expectations for 2023 are mixed among respondents – 40% say revenues should increase , 48% see declining revenues and 12% expect no change. Last year’s results were much more optimistic: 80% expected revenues to increase in 2022. As a result, more respondents (33%) plan to cut costs compared to last year, when only 6% planned to shortened
Respondents point to continued high inflation, workforce management, cyber risk and climate-driven regulatory actions as issues that will have the greatest impact on earnings over the next 12 to 18 months. Unfortunately, most respondents do not think the industry is fully prepared to respond to certain uncertainties. As Figure 1 shows, the main concerns varied considerably by geography.
When it comes to real estate fundamentals – cost of capital, availability of capital, property prices, vacancy levels, leasing activity, transaction activity and rental rates – the majority of respondents (66%) expect conditions improved or stable for the next year. Respondents point out that leasing activities, tightening vacancies and increasing rents have the strongest potential for improvement.
Overall, downtown and suburban offices are seen as the most attractive risk-adjusted opportunities among property types over the next 12 to 18 months. However, there were significant differences between regions: European respondents identify suburban offices as their biggest growth opportunity (35%), Asia Pacific respondents strongly favor digital economy properties (43%) and North American respondents In the North, they choose logistics spaces and warehouses (43%) as their main bet.
Investment Sales To Stay In High Gear, Led By Commercial Deals
Uneven trajectories may force the industry in new directions over the coming years. Amid high uncertainty, many CRE owners and investors will need to focus on strategic asset-level decision-making.
As the regulatory environment heats up globally, CRE firms will need to focus more on ESG disclosure requirements and addressing trends in tax regulation
Our survey shows that real estate firms are still in the early stages of managing their ESG compliance requirements. Only 12% of respondents say they are prepared to immediately implement changes to meet new regulatory requirements and only 7% use ESG data and analysis in their investment strategy decision-making (figure 2). Most plan to start incorporating ESG data within the next year to two years.
Real estate companies will need to learn about potential regulatory changes and adopt practices to meet reporting requirements. While more than 45% of respondents say they are waiting for guidance or an industry-driven response, industry associations can play a critical role by providing observations, information and recommendations. CRE leaders should also be sure to focus on more than just the “E” in ESG – social and governance issues are also important.
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Respondents also closely followed trends in tax regulation. With tax policies in flux worldwide, the biggest concerns for the industry were increases in tax rates, changes in transfer pricing/profit sharing and automation of enforcement. CRE leaders can help prepare their organizations for the upcoming tax changes by:
2) Considering the tax implications of ESG initiatives. For qualifying activities, existing or soon-to-be-enacted legislation may provide property organizations with tax benefits, such as tax credits.
Many geographies still face competitive talent markets. Employees are benefiting from low unemployment rates, a rising wage environment and more telecommuting options. The pandemic also spurred population shifts—many people moved as work-from-home arrangements became the norm. CRE companies should see the desire to work remotely as a long-term talent trend.
Understanding employee expectations will help CRE leaders recruit and retain talented people. More than 40% of respondents plan to strengthen diversity, equity and inclusion (DE&I) initiatives, add additional health and wellness benefits, and offer regular remote work options. But only about a third (or less) say their firms are prioritizing measures such as redesigning the workplace, implementing flexible schedules and offering more career growth and skill development opportunities. All of these areas can help CRE firms improve the talent experience.
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Compared to our Outlook 2022 results, more respondents plan to reduce or limit technology spending as firms rein in spending with softened revenue expectations. Many expect some reductions in the cost of technology in their companies, and less than half expect to see any increases, especially in Europe (figure 3). This is in stark contrast to last year’s survey results, where only 7% expected spending cuts and two-thirds expected their companies to increase spending in the future.
Not investing enough in technology can be short-sighted. Real estate firms with flexibility and risk appetite within the current environment can move forward by exploring how
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