Caution Prevails in Commercial Real Estate

Investors and lenders are more careful today as a result of the Great Recession, according to Scott Hileman, director, real estate consulting at Deloitte Financial Advisory Services.

"I think going forward, people will be a lot more cautious whenever they're making new investments, in terms of understanding the market and the properties," he said during a video interview with REIT.com at the Akerman U.S. Real Estate Summit this month in Miami.

That caution is expected to remain in place; Hileman doesn't expect to see the "irrational exuberance that came out of the market in 2007." Banks, in particular - which face strong regulatory pressures - will be more cautious when making new loans, Hileman noted.

In the event of another recession, Hileman said the commercial real estate market as a whole will be better prepared.

"Having gone through that Great Recession, I think everyone is much more cognizant of the signs," he said. "When we see issues pop up, I think there will be an adjustment made more quickly than it was back in 2006, at the height of the market."

Additionally, Hileman said that public companies are ahead of the curve in terms of being able to make new investments after the recession. He noted that the publicly traded companies have done a better job in clearing up their balance sheets and raising capital.

Overall, Hileman said that the commercial real estate market in the United States is faring better than those in other global markets.

"Certainly the U.S. is in a lot better shape right now, in terms of where we are in the market cycle and where we are in terms of investors," he said.