Real estate survey: Biggest concern from sector leaders is the rising cost of capital
The biggest issue facing real estate today? That’s easy. The ever-increasing amount of debt required to take on a project due to rising interest rates.
At least, that was the overwhelming answer Monday during the unofficial ROI-NJ survey at the Jersey City Summit for Real Estate Investment.
When given a choice of five options, 50% of the more than two dozen attendees surveyed said the rising rates were the biggest issue facing the industry. Here’s a look at how the five questions fared:
- Rising rates/debt: 50%
- Too many rules and regulations: 20%
- General state of the economy: 20%
- Taxes: 6%
- Energy concerns: 4%
Don’t look for any scientific metrics around the survey. Simply put, it’s just a one-question query put to people representing a wide variety of aspects of the real estate industry.
Here’s a sample of some of their verbal responses:
Adam Zweibel, managing partner, Hudson Atlantic: The problem with debt right now is this is affecting the whole real estate market. Investors have to come in with so much more equity because interest rates have jumped, you’re borrowing at higher rates, but you’re getting less proceeds, which, in return, either values have to come down or investors have to come in with more cash. So, people are unable to do as many deals as they used to.
Too many rules and regulations
Moshe Gross, owner, Reset Locations: Rules and regulations are still holding things up. Projects cannot get through the process quick enough.
General state of the economy
Marlyn Zucosky, regional director, Ware Malcomb: Because of the decrease in tenancy in office buildings, the valuation of the buildings have decreased, and the loans are now larger than the value of the buildings. We’re going to go through a significant period where office buildings in New Jersey are going to be really challenged.
Brenda Cioce, president, RHO Residential: There’s a shortage of skilled personnel — people that are willing to work. Everyone is facing this challenge. It’s hard to find people that are willing to work five days a week. Or they want to tell you what hours they want to work — and that they want to work from home.
Jerry Joseph, managing director, RIPCO Real Estate: The (payment in lieu of taxes) is the last piece that’s needed to make long-term projects work. Without a long-term predictable tax abatement and tax PILOT program, the numbers won’t work. For all the talk about the high interest-rate environment, high-cost environment and the capital stack, the ROI is actually driven by taxes. We don’t need to get rid of taxes, we just need sensible tax policies.