Despite a skittish U.S. economy, most commercial real estate investors remain upbeat and cautiously optimistic about the industry’s future, according to the PwC Real Estate Investor Survey. In fact, the majority continues to invest in all sectors of commercial real estate, as they continue to see signs that the industry’s fundamentals are stabilizing.

While rental rates remain below peak levels, investors in 25 of the 31 markets that the survey covers concur that they have stabilized.

“The trajectory of the commercial real estate industry’s recovery is largely dependent on the health of the U.S. economy,” noted Mitch Roschelle, a partner and leader of the U.S. real estate practice at PwC. “The ability of the economy to add jobs instills optimism in both businesses and consumers. Despite recent disappointing labor reports and falling home prices, commercial real estate investors continue to look to the positive aspects of the industry as they remain cautiously optimistic that the recovery path will continue.”

Also helping the commercial real estate industry rebound is the fact that few buildings have been built over the past few years. “As tenant demand continues to grow, positive absorption has begun to drive rents up,” Roschelle added. “The prospects of rent growth have driven much of the aggressive bidding by investors in certain top-performing markets.”

In addition, stock market volatility, low fixed income coupons and weakening currencies are driving many investors into hard assets such as precious metals, commodities and real estate, Roschelle added.

The survey also showed that investors are confident that Manhattan will lead the recovery and rebound faster and stronger than most other metro areas. In fact, investors have pre-recession growth expectations for Manhattan and other central business districts.

“Surveyed investors are treading carefully as they realize that troubles could arise if interest rates rapidly increase at the same time a large pool of commercial maturities peaks over the next two years,” said Susan Smith, editor-in-chief of PwC’s quarterly survey. If that happens, that would negatively impact property values, she said.

“Luckily, though, most of the participants have told use that they maintain an optimistic outlook for now, even if cautiously so,” Smith said.

As far as the four main commercial property sectors—office, retail, industrial and multi-family—the PwC Real Estate Barometer shows that investors expect 62.4% of the office stock to be in recovery mode by year-end. However, they think retail stock will be in recession through the end of 2012, improve slightly in 2013 and recover by 2014.

Improvements in manufacturing, capital goods shipments and business and consumer spending have helped the industrial sector. Vacancies are declining, and recovery seems to be underway, the investors said. As a result, investors expect this sector to do very well over the next 15 months.

Multi-family properties are the best-performing area of commercial real estate, the barometer shows, and this sector is expected to continue to expand through 2014.

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