Florida REALTORS®
Commercial Real Estate Lending Study
Market Enhancement Group, Inc.
June 2013
Survey Objectives
•
To assess the commercial real estate lending market in Florida with a special
emphasis on:
•
The impact of credit availability and lending standards.
•
The ability to and barriers to refinancing.
•
The role of international commercial real estate clients.
•
Trends in net operating income for commercial real estate professionals.
•
The effect of commercial real estate appraisals.
•
The current and potential impact of regulatory changes.
•
Identify differences between commercial real estate professionals who
are REALTORS® and those who are not REALTORS®.
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Methodology
•
Telephone interview methodology.
•
The interviewing achieved a completion rate of 77% of all commercial real
estate professionals who were contacted.
•
Respondents were not limited to those who belong to the Florida
REALTORS®.
•
400 surveys completed in June 2013.
•
Results are statistically projectable at two standard deviations (a 95%
confidence level). Overall data is subject to a maximum sampling error of
+/- 5.0%.
•
Survey respondents were selected on a random probability basis from a list
provided by the Florida REALTORS®.
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Methodology
•
An important consideration is that we are measuring perceptions.
•
Perceptions are never wrong; they can, however, be factually incorrect.
•
When respondents make decisions, perceptions are more important than the
facts.
•
Most interviews were done on cellular telephones. The cellular telephone is
the commercial real estate professional’s main telephone.
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Definitions
•
The survey breaks some questions down by “generations.”
•
The generations are defined as follows:
•
Gen Y: born 1980 to 1999 (age 33 and younger)
•
Gen X: born 1965 to 1979 (age 34 to 48)
•
Boomers: born 1946 to 1964 (age 49 to 67)
•
Seniors: born pre-1946 (age >67)
•
Newer commercial real estate professionals are defined as: 3 years or less in
commercial real estate experience.
•
Seasoned commercial real estate professionals are defined as: >3 years in
commercial real estate experience.
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Call Statistics
Sample universe
2,837
No answer
20
Respondent not available, could not reach, answering machine/voice mail
20
Not qualified
2
Wrong number
3
Could not identify a telephone number or no telephone installed
Language barrier
14
0
Refused to participate
42
Terminates, partially completed interview (does not count in completed column)
17
Total contacted or attempted to contact, but did not complete the total interview
118
Completed surveys
400
Total number of contacts
518
Number of calls to reach completed interviews (multiple calls to get all completes)
Average number of calls and callbacks to get a completed interview
3760
9.4
Completion percentage based on all attempted
77%
Percentage of sample universe contacted, attempted to contact, or interviewed
14%
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Survey Respondents
50%
50%
Commercial real
estate broker
Commercial real
estate non-broker
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Survey Respondents: Area of Specialty
14%
27%
59%
Sales
Leasing
Management
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Macro Conclusions
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Macro Conclusions
•
70% of all survey respondents were REALTORS®.
•
75% of commercial real estate professionals completed at least one sales
transaction within the past one year.
•
95% of REALTORS® completed at least one commercial real estate
transaction in the past one year. Whereas only 27% of non-REALTORS®
completed at least one commercial real estate transaction in the past one
year.
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Macro Conclusions
•
REALTORS® were also more likely than non-REALTORS® to have registered
increases in net operating income from the fourth quarter of 2007 to the
fourth quarter of 2012 than non-REALTORS®.
•
Experience counts: 74% of seasoned commercial real estate professionals
closed at least one commercial real estate transaction in the past one year,
as opposed to 68% for newer commercial real estate professionals.
•
Reasons for failing to complete a transaction within the past 12 months:
•
Lack of financing
59%
•
Low appraisal
41%
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Macro Conclusions
•
•
•
45% of survey respondents have had a client fail to complete a refinancing; however,
that figure is higher for REALTORS® than for non-REALTORS®
•
REALTORS®
50%
•
Non-REALTORS®
31%
27% of survey respondents had a sale to international clients and investors. However,
international sales are highly concentrated on a geographical basis:
•
Miami-Dade, Broward, or Palm Beach County 50%
•
Orange County
41%
•
Hillsborough or Pinellas County
38%
•
All others
13%
81% of all survey respondents believed that the new and proposed U.S. legislative and
regulatory initiatives (e.g. Dodd-Frank, lease accounting, Basel III, etc.) will decrease
the flow of capital into U.S. real estate.
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Detailed Findings
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Membership in Florida REALTORS®
30%
70%
Yes
No
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Completed a Sales Transaction during the Past 12 Months
All Respondents
25%
75%
Yes
No
Q: Have you completed a commercial real estate sales transaction during the past 12 months?
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Completed a Sales Transaction during the Past 12 Months
95%
27%
REALTOR®
Non-REALTOR®
Q: Have you completed a commercial real estate sales transaction during the past 12 months?
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Completed a Sales Transaction during the Past 12 Months
72%
Broker
78%
Non-broker
Q: Have you completed a commercial real estate sales transaction during the past 12 months?
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Completed a Sales Transaction during the Past 12 Months
79%
76%
66%
Sales
Leasing
Management
Q: Have you completed a commercial real estate sales transaction during the past 12 months?
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Completed a Sales Transaction during the Past 12 Months
All Respondents
68%
Newer
74%
Seasoned
Newer = 3 yrs. or less in commercial real estate.
Seasoned = > 3 yrs. of experience in commercial real estate.
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Completed a Sales Transaction during the Past 12 Months
All Respondents: By Generation
80%
78%
73%
66%
Gen Y
Gen X
Boomer
Senior
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Average Loan-To-Value (Financing, LTV) Ratios for
Commercial Transactions over The Past Year
20%
All Cash
5%
90%
85%
8%
80%
8%
20%
75%
18%
70%
8%
65%
7%
60%
3%
55%
50%
2%
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Value of Your Most Recent Sales Transaction
13%
Under $250K
11%
$250K to <$499K
26%
$500K to <$999K
10%
$1M to $1.9M
18%
$2M to $4.9M
19%
$5M-$10M
>$10M
3%
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Property Type for Your Most Recent Sales Transaction
Multi-family
Industrial: Warehouse
Industrial: Flex
Retail: Strip center
Land
Office: Suburban
Office: CBD
Freestanding retail
Restaurant
Retail: Mall
Mixed use
Vehicle dealership
Convenience store
Car wash
Hotel
Hospitality
22%
13%
11%
11%
7%
7%
6%
6%
4%
4%
3%
3%
2%
2%
1%
1%
Percentages will not total
to 100% due to rounding.
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How Did the Net Operating Income ($/SF) of Properties You Sold or Leased Change
from the 4th Quarter of 2007 to the 4th Quarter Of 2012
5%
Increased 10% - 15%
Increased 5% - 9%
11%
11%
1%
Increased 1% - 4%
26%
4%
No Change
25%
Decreased 10% - 19%
9%
7%
Decreased 20% - 24%
4%
Decreased 25% - 29%
Decreased 30% - 34%
0%
Decreased 35% - 39%
0%
Decreased 40% - 49%
19%
28%
REALTOR®
25%
Non-REALTOR®
7%
10%
Percentages will not total
5%
1%
to 100% due to rounding.
3%
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Have you failed to complete a transaction during the past
12 months due to lack of financing?
41%
Yes
59%
No
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Have your clients failed to complete a refinancing
transaction during the past 12 months?
10%
45%
Yes
No
N/A
46%
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With properties where refinancing was an issue, if the owners provided
an existing or new property lease with net operating income (NOI) at
levels similar to the pre-2006 period, did the property still fail to secure
refinancing?
50%
50%
Yes
No
N=178
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If yes, why did the property still fail to secure
refinancing?
37%
63%
Internal underwriting
requirements of lender
Appraisal/Valuation
N=89
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Have Failed to Complete a Transaction in the Past
12 Months owing to Appraisals
41%
59%
Yes
No
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During the past 12 months, did you have sales to
international clients/investors?
27%
Yes
No
73%
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Had Sales in the Past 12 Months to
International Clients/Investors (% per area)
Miami-Dade, Broward, or Palm Beach
County
50%
41%
Orange County
38%
Hillsborough or Pinellas County
All others
13%
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Country Source of International Sales
23%
Brazil
17%
Mexico
12%
Canada
11%
Germany
7%
Saudi Arabia
China
6%
Columbia
6%
5%
Honduras
Guatemala
4%
Taiwan
4%
Argentina
1%
France
1%
Hong Kong
1%
United Kingdom
1%
N=82. Percentages will not total
100% due to rounding.
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The Most Relevant Cause for the Lack of Sufficient Bank
Capital Available for Commercial Lending
Reduced net operating income, property
values, and equity
27%
New and proposed U.S. legislative and
regulatory initiatives
23%
Regulatory uncertainty for financial
institutions
17%
A slow-down in the pooling and packaging of
CMBS by financial institutions
17%
Inability of banks to dispose of distressed
assets
17%
Aided response
categories.
Percentages will not
total to 100% due to
rounding.
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How Lending Conditions Changed Over This Year
Tightened Significantly
Tightened Somewhat
12%
20%
53%
Not Changed
Eased Somewhat
15%
Zero response categories
are not displayed
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Which Groups Currently Provide Financing for Commercial Deals
48%
Community/Local Banks
44%
Regional Banks
30%
National Banks ("Big four")
28%
Private Investors
24%
Mortgage Brokers/Cos.
20%
Owner Financing
REITs
15%
Life Insurance Cos.
15%
11%
SBA
10%
Credit Unions
Public Companies
6%
There are multiple responses. Percentages will not total 100%.
The average respondent gave 2.51 different responses.
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Do you believe new and proposed U.S. legislative and regulatory
initiatives (e.g. Dodd-Frank, lease accounting, Basel III, etc. will):
81%
Decrease the flow of capital into U.S. real estate
Have no effect on the flow of capital into U.S.
real estate
12%
Have no effect on the flow of capital into U.S.
real estate, but change the way in which
transactions or loans are structured
5%
Increase the flow of capital into U.S. real estate
3%
Aided response categories. Percentages
do not total to 100% due to rounding.
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Select the Most Important Proposed Policy Priority
Needed to Improve Commercial Lending Conditions
Credit union lending (Legislation introduced to
raise the member business lending cap from
12.25% to 27.5% of total assets for well-…
37%
Reauthorize the SBA's new commercial
refinance program (Program provides SBA loan
for up to 40% of appraised property value with…
25%
Covered bonds (Legislation introduced to create
a U.S. covered bond market)
No policy action (Allow full private market
correction)
23%
15%
Aided response categories
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Demographics and Experience
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Demographics and Experience
•
The typical commercial real estate professional has a decade of experience
in the business. Only 28% have three or fewer years of experience.
•
Most commercial real estate professionals are male (62%).
•
The average commercial real estate professional is 45 years of age .
•
60% have a BS/BA degree or higher.
•
Over half (56%) are Caucasian. A quarter (25%) are Hispanic.
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County Office is Located In
There are 66 counties in Florida. There are respondents in
56 counties. In the 10 counties where there are no survey
respondents, they all have a population of under 17K
based on the 2010 U.S. Census.
53%
30%
11%
6%
All others
Miami-Dade,
Broward, or Palm
Beach County
Hillsborough or
Pinellas County
Orange County
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Respondent Age
44.89
44
Mean
Median
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Respondent Age
Under 25 years
2%
27%
25 to 34 years
22%
35 to 44 years
23%
45 to 54 years
16%
55 to 64
11%
65 or older
Percentages do not toal to 100% due to rounding.
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Respondent Age
36%
29%
28%
8%
Gen Y
Gen X
Boomer
Senior
Percentages do not toal to 100% due to rounding.
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Education
Some high school (no diploma)
0%
High school diploma
0%
15%
Some college (no degree)
26%
AA degree (2 years)
50%
BA/BS degree
8%
Master's degree
Some graduate school (no degree)
1%
JD/LLM/PhD
1%
Percentages do not toal to 100% due to rounding.
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Commercial Real Estate Experience
10.48
10
Mean
Median
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Commercial Real Estate Experience
28%
72%
Newer (3 yrs or less experience)
Seasoned (>3 yrs experience)
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Commercial Real Estate Experience
10.73
9.84
REALTOR®
Non-REALTOR®
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Commercial Real Estate Experience
10.06
Broker
10.21
Non-broker
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Survey Respondents: Gender
38%
62%
Male
Female
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Survey Respondents: Ethnic Background
56%
White/Non-Hispanic
25%
Hispanic, Latin American
9%
African American, Black
Other Asian
Chinese
6%
5%
Percentages do not toal to 100% due to rounding.
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