NAIOP CRE Sentiment Index: Steady, Sustainable Growth Expected

See the outlook of commercial real estate developers, owners and investors

NAIOP, the Commercial Real Estate Development Association, has released the NAIOP CRE Sentiment Index for Spring 2019, a composite of nine survey questions that represents the outlook of commercial real estate developers, owners and investors.

NAIOP Sentiment Index

The NAIOP CRE Sentiment Index for Spring 2019 indicates that the respondents believe overall market conditions 12 months from now will continue to be favorable for the CRE industry. The index decreased by 1.00 percent from a reading of 0.66 in Fall 2018.

Year-over-year, a 3.50% improvement in the cost of construction labor and a 3.30% improvement in the cost of construction materials helped keep the overall Index positive. The availability of debt was also seen as a positive contribution to development in the next 12 months (an improvement of 1.50%).

In earlier surveys, the availability of capital had been a concern, but those worries appear to have eased in the past 18 months. Respondents indicated that rents (both face and effective) and occupancy rates now appear to be more pressing issues for developers.

Key takeaways:

  • Respondents agree the availability of debt and capital will be plentiful over the next 12 months.
  • Construction labor and materials costs will continue to rise during the next year, though perhaps at a slower rate than in previous years.
  • Occupancy rates will be higher, although continue at a tempered pace than in previous surveys.
  • Face and effective rents will continue to rise at a modest rate over the next year.

Graphs and observations for each of the questions, covering everything from jobs to the space markets to construction costs, capital markets and more, are available at, or download the full report. 

Direct from Survey Participants
The following selections are comments from survey participants:

“Working with industrial assets, demand for product is outweighing the supply. Rents and absorption levels are high across the board, with vacancy at historic lows. Do not see the trend stopping, recession or not, as the infrastructure of commerce has a large footprint. That will only continue to expand.”

“We see a continuing disconnect between values determined by historically low cap rates, and the risks and realities of capital requirements to keep multitenant buildings well occupied and maintained.”

“I am optimistic about the overall outlook for the next 12 months — especially the availability of capital — but cautious about rent growth. Occupancy will likely remain constant.”

“We have been worried about a possible recession and higher interest rates for several years. I don't expect any meaningful increase in interest rates in the near future, but the fears of a recession seem more real now. It may not start in 12 months, but is likely in the next 24 months.”

“Supply/demand conditions for industrial remain in balance except for select low-barrier-to-entry submarkets. Construction costs, labor availability and entitlement friction will keep a lid on rampant supply growth. The key is the continued demand drivers as supply chains shift and adjust to demands of new distribution networks.”

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

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

Kathryn Hamilton