The NAIOP CRE Sentiment Index, which measures industry expectations for commercial real estate market conditions over the next 12 months, has dropped to 50 – down from 56 in Fall 2024. This decline suggests a more cautious outlook across the industry.

Despite the overall dip in sentiment, developers and building owners still indicate plans to increase investment. It's worth noting that the survey was conducted in mid-March, before the Trump administration announced new tariffs on nearly all U.S. imports, a move that could further influence industry sentiment.

The NAIOP CRE Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months by surveying industry professionals on the future conditions of their projects and markets. The survey includes questions about jobs, space markets, construction costs, capital markets and other real estate development fundamentals. An Index below 50 indicates unfavorable CRE conditions are expected in 12 months; 50 means no change in CRE conditions is expected in 12 months; and above 50 indicates favorable CRE conditions are expected in 12 months.

Developers and building owners still plan to increase investment

Respondents expect transaction volumes to increase at nearly the same rate (score of 57) as in the September survey (score of 58). Open-ended comments suggest that more deal volume will be concentrated in existing buildings than in ground-up development. Not everyone is deploying capital, however, and several respondents indicated in comments that they are waiting on the sidelines due to uncertainty about the direction of the economy.

Among the additional key findings:

• Respondents now expect construction material and labor costs to rise sharply over the next 12 months.
• Respondents are slightly more optimistic about occupancy rates and rents than they were in September.
• They are somewhat less optimistic about capital market conditions, including the availability of debt and equity.
• Most respondents expect to be most active in either industrial or multifamily real estate during the next 12 months.

“Economic conditions and the ability to predict them are certainly in flux at the moment,” said Marc Selvitelli, president and CEO of NAIOP. “While there is concern regarding costs for construction materials, the survey results reflect optimism regarding occupancy rates and a positive outlook on investment activity.”

Survey respondents are NAIOP members in the U.S. who are developers, building owners, building managers, brokers, analysts, consultants, lenders and investors in commercial real estate. A total of 395 respondents from 289 distinct companies participated in the Spring 2025 survey. Responses were collected March 12-20.