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CRE 12-month Sentiment Reaches All-time High

NAIOP CRE Sentiment Index reveals the very positive outlook of commercial real estate developers, owners, investors and brokers

NAIOP, the Commercial Real Estate Development Association, has released the NAIOP CRE Sentiment Index for Fall 2018, a composite of nine survey questions that represents the outlook of commercial real estate developers, owners and investors.

NAIOP Sentiment Index

This survey’s 0.66 Sentiment Index score is the highest posted since the full survey commenced in March 2016, as respondents indicated that the fundamentals underpinning commercial real estate will be stronger in 12 months than they are today.

Download the Fall 2018 NAIOP Sentiment Index Report.

Among the key findings:

  • The reading showed positive changes in seven questions, with five of them reaching all-time highs: employment, face rents, effective rents, available debt, and available equity.
     
  • The highest reading in the survey indicated that CRE executives expect to add employees at real estate companies over the next 12 months.
     
  • At the same time, however, respondents are greatly concerned about the costs of construction materials and labor as indicated by the lowest score recorded for each category since the survey started.

View graphs and observations for questions and commentary about jobs, the space markets, construction costs, the capital markets and more.

Direct from Survey Participants

The following selections are comments from survey participants:

“Capital is driving the market. You are starting to see some questionable developments and investments, but not to the extent that would lead to a major correction. If interest rates only creep up gradually, I think we are in for a good run for 12 to 18 more months [at a] minimum. Consumer sentiment is off the charts. [The] U.S. economy [is] not even hitting on all cylinders yet. Times are good right now. Don't sleep; just make deals!!!”

"… Basically, the landscape of commercial office buildings is changing faster than we have ever seen in the past. Based on the speed of changes happening in technology, I predict substantial changes to our traditional real estate cycles."

“The confluence of [a] tight labor [supply], increasing materials costs, rising cap rates and increasing rates are slowing investment, changing outlooks and expectations. We expect a downturn to begin in the next 12 months and to accelerate for 12 to 18 months thereafter. The reason is the oversupply of products and too many funds increasingly chasing too few reasonable opportunities.”

"Lack of construction labor is causing delays and construction cost increases. The shortage of labor in all sectors of the economy is the No. 1 issue businesses are dealing with. Overall, capital spending is good and corporate earnings are healthy for continued expansion."

About the Index

View the full results and download a PDF of the report at naiop.org/sentimentindex.

The NAIOP CRE Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months. The questions relate to CRE fundamentals and provide insight about the health of critical CRE components. Respondents are asked to consider projects in their pipelines and indicate whether their 12-month outlook for each category is positive, negative or neutral. The responses are weighted and combined into an Index expressed as one number. Readings above zero indicate that in 12 months CRE conditions will be better than they are at the time the survey is taken.

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, as well as approximately 2,000 CRE brokers.

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 19,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit naiop.org.

MEDIA CONTACT:
Kathryn Hamilton
703-904-7100
hamilton@naiop.org