NAIOP Sentiment Index: U.S. Commercial Real Estate Outlook is Positive, Bolstered by Confidence in Employment, Occupancy Rates

The outlook of commercial real estate developers, owners and investors

NAIOP, the Commercial Real Estate Development Association, has released the NAIOP Sentiment Index for Spring 2017, a composite of nine survey questions that represents the outlook of commercial real estate developers, owners and investors.

NAIOP Sentiment Index

The Index of 0.56 indicates that respondents believe, as a group, that overall market conditions 12 months from now (March 2018) will continue to be favorable for the commercial real estate industry. It is 0.90 percent higher than the previous survey conducted in September 2016, reflecting an expectation that the CRE market will be moving ahead at a more robust pace than what was expected six months ago. Among the key findings:

  • The two largest positive changes in the survey that helped keep the Index in positive territory were much greater confidence in employment and in occupancy rates. Survey scores for both adding employees (a 5.00 percent increase) and occupancy rates for new projects (a 5.30 percent increase) show a major trend reversal for these two categories after both slid consistently over the prior three surveys.
  • Respondents were much more concerned about the costs of construction materials and labor and about first-year cap rates than they were six months earlier. Expectations for both materials and labor costs fell to larger negatives (decreases of about 3.00 percent) and optimism for first-year cap rates fell by 4.50 percent.

Overall, respondents were generally more optimistic about the CRE market in the coming year. The general sentiment score is the highest it has been since September 2015 and is a good sign for the CRE market in that survey respondents expect a positive commercial real estate climate over the next 12 months.

The survey’s overall Index reverses a consistent two-year downward trend; although the Index is positive, it has declined by 0.54 points (that is, by 5.40 percent on an absolute basis) since the first beta test of the survey was conducted in February 2015.

About the Index
View the full results and download a PDF of the report at

The Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months. The forecast is not based on an analysis of historical data, but rather a look into the future by commercial real estate developers, owners and investors. NAIOP members are asked to respond to questions based on their ongoing work, including projects in their pipelines. The survey is conducted biannually, in the spring and in the fall. The survey is sent to 5,000 NAIOP members who develop, invest in and operate commercial real estate in the office, industrial, retail and multifamily sectors. Survey results reflect the views of roughly 20 percent of NAIOP's U.S.-based CRE development and investment companies.

The data is compiled and analyzed by Tom Hamilton, Ph.D., MAI, CRE, and Gerald Fogelson Distinguished Chair in Real Estate at Roosevelt University in Chicago.

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About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 18,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit

Kathryn Hamilton