Business Survey Gauges Real Estate Market Conditions From Tri-State, Mid-Atlantic Regions

Responses Reveal Recovery Moving at a Slower Place, but Builders Remain Resilient. End Quote

New York, NY (1888PressRelease) August 25, 2010 - The economic recession continues to linger, and job recovery is moving at a slower pace than expected, so real estate firms are coming to realize they need to shift strategies and work harder to generate the same revenues. Many builders have mixed-use and multifamily projects lined up, waiting for stronger activity before they can move ahead.

To get a clearer picture of how current economic conditions are impacting builders, the Strategic Alliance, a group of real estate-related companies, conducted a business survey that covered more than 1,000 builders and developers and other industry professionals in the Tri-State and Mid-Atlantic regions, as well as Pennsylvania and Florida. The survey, which was the second sponsored by The Alliance during 2010, polled real estate experts involved in the commercial, single-family, multifamily, and 50+ active adult markets.

"While most builders hoped that conditions would trend up quicker this year, there are some fundamental problems that still need to be resolved before projects can move forward," stated Bill Feinberg, president of Feinberg & Associates, P.C. and founder of the Strategic Alliance.

Not surprisingly, 66.6% of respondents indicated that the economy has not pulled out of its slump. Although 47.3% indicated that the business cycle for the real estate market remains in a recession phase, 36.8% indicated that the market is in a recovery stage, and only 12.2% saw the cycle as severely down.

A look at the current lending landscape revealed lending terms and conditions that remained tight, reported 43.8% of respondents. In a breakdown, 26.3% described lenders as too cautious when it came to credit risk; and 17.5% claimed smaller banks are more willing to make loans than larger institutions.

The findings also revealed that 57.8% of builders saw no "positive indicators" that the commercial market is beginning to correct itself. Further, when asked to identify the most pressing challenges in developing residential real estate today, 45.6% of respondents said that demand was the greatest factor, followed by 33.3% who pointed to financing issues. In descending order, approvals/permitting, availability of land parcels, and the cost of materials were ranked less significantly.

When asked the question: "Since the recession, do you see large development firms changing the way they do business in an effort to share financial risk?" Nearly half, 45.6% said yes, there are more joint ventures. Thirty-five percent were unsure while 19.2% said the majority of companies are still working independently.

Rethinking Strategies
With an eye toward the future, builders are exploring new strategies to meet buyer demands. Sixty percent said that to stay competitive, they are shifting away from bigger traditional home designs to conservative pedestrian-oriented mixed-use neighborhoods. Another question showed more than 63.1% are re-evaluating their projects, planned pre-recession, from a product/layout/density standpoint.

The multifamily residential market came out on top as the sector holding the greatest potential for growth over the next year with 61.4% of respondents, followed by 19.2% for single-family, and 8.7% for active adult.

In the active adult marketplace, "monotony is out, and variety will be the spice of life," said William Becker, president of The William E. Becker Organization. The potential for long-term growth in that sector was rated as average by 42.1% of survey respondents, and weak by nearly 30%. Only 17.5% saw strong potential. Market activity hinges on improved economic and job market condition, according to Becker. "We need a large decrease in the re-sale inventory to get these buyers back into the market," he added.

The data showed that more than half of the respondents anticipate a broader base of product offerings for active adult communities as the market returns. "Builders have recognized that not every buyer wants a 'single-family detached home'. Buyers like a neighborhood feel but also look for variety in their community, with different style homes," said Becker.

Finally, the region's economic future hinges on its ability to redevelop older cities and suburbs. Unfortunately, large hurdles still exist for private-sector reuse of brownfield sites. When asked to identify the largest barriers, one-third pointed to complicated regulatory requirements. Secondly, the availability of funding was identified by 21%, followed by the legal liability for contamination by 19.2%.

The Strategic Alliance offers builders and developers a unique scope of services, from the initial acquisition of land to the final sales and marketing of a development. The partnership combines the talents of multi-disciplinary firms that can collaborate on projects to take advantage of new opportunities in today's tumultuous marketplace, including architects; acquisition and development professionals; civil, environmental and structural engineers; financial resource experts and sales and marketing professionals. By sharing information and knowledge across company borders, the Strategic Alliance leverages areas of synergy. The combined workforce of member companies exceeds 500 professionals with offices in the New York Tri-State and Mid-Atlantic regions.

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