T
he NAIOP CRE Sentiment Index, a measure of industry expectations for commercial real estate market conditions over the next year, has seen significant growth since its last survey in the spring. The Index now stands at 56, indicating that respondents expect improved conditions in commercial real estate development.
The Index is designed to predict general conditions in the commercial real estate industry by surveying professionals on their projects and markets. It includes questions about jobs, space markets, construction costs, capital markets, and other fundamentals. A score below 50 indicates unfavorable conditions are expected, while a score above 50 indicates favorable conditions.
Compared to the April survey, debt availability and equity availability showed the largest improvement. This is likely driven by expectations of declining interest rates, with eight respondents taking the survey after the Federal Reserve announced a rate cut on September 18th.
Key findings include:
* Respondents have a positive outlook for all components except construction labor costs.
* Expectations of rising demand and valuations for commercial real estate are high.
* Declining interest rates are behind much of the improvement in the Index.
* Greater optimism is leading developers to project increased deal volume over the next year.
Most respondents expect to be active in either industrial or multifamily real estate during the next 12 months. NAIOP President and CEO Marc Selvitelli notes that additional interest rate cuts could lead to further improvement in sentiment, driven by growth in technology, redefined retail, and positive absorption in industrial markets.
The survey was conducted among 496 respondents from 374 distinct companies, including developers, building owners, managers, brokers, analysts, consultants, lenders, and investors.
