RER Sentiment Index: CRE Industry Still Looks Good—For Now

By Barbra Murray, Contributing Editor

Jeff DeBoer, Real Estate Roundtable

New York—The first quarter of the year is firmly in the rearview mirror and commercial real estate industry executives are bullish on the market—still—according to The Real Estate Roundtable’s Q2 Sentiment Index.

“There are concerns—some traditional, such as job growth and some more unique, such as the elections and global weaknesses. But despite the cycle position and world challenges, the survey reveals continued optimism on the part of U.S. commercial real estate owners and financiers,” Jeffrey D. DeBoer, president & CEO of The Real Estate Roundtable, told Commercial Property Executive. RER again relied on FPL Advisory Group to administer the survey.

There were tiny changes in numbers, but changes nonetheless. The Overall Sentiment Index inched down to 49 in the second quarter from 50 in the first quarter; but it’s still just a hair from 50, which is the point where the indices enter the “positive” category. The Current Conditions Index also registered a slight decline, going from 54 to 51. But the needle went in a different direction with the Future-Conditions Index, which rose three points to 48, quarter over quarter.

Survey participants are still optimistic about equity availability, with 76 percent anticipating that availability will stay the same or get much better over the next 12 months. Industry leaders’ feelings on debt, however, have changed a bit. This quarter, the percentage of respondents forecasting that debt availability will either remain the same or improve dropped to 55 from 67 last quarter—but the new figure is still well above the “positive” mark.

As for the topic of asset valuation, industry executives have quite the positive outlook. Seventy-one percent of respondents expect asset valuations to either hold steady or grow somewhat higher over the next year, compared to just 59 percent last quarter. No one saw that coming. “This late in a normal economic cycle, one would expect to see greatly reduced investor demand and downward pressure on asset values across markets,” DeBoer said.

Despite any upswings or downswings in the survey numbers, commercial real estate industry leaders’ outlook for the next year remains the same: cautiously optimistic. And they’re acting accordingly. As one respondent said, “I’ve taken my foot off the gas, but I haven’t put it on the brake.”