New: Fall 2019 Sentiment Index

Posted on November 15, 2019

About The NAIOP CRE Sentiment Index

The NAIOP 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 it represents a look into the future by real estate developers, investors, operators and brokers. These NAIOP members are asked to respond to questions based on their ongoing work, including projects in their pipelines. For more information, see Understanding the Index.

Key Findings

The NAIOP CRE Sentiment Index for September 2019 is above 50, indicating that the commercial real estate market should continue steady, sustainable growth over the next 12 months, and overall commercial real estate development conditions should improve slightly through at least the end of 2020. Respondents predict increases in occupancy rates, face and effective rents during the next year, along with steadily available equity and debt financing for projects in their pipelines. A majority plan to hire employees, even though the costs of construction materials and labor continue to cause concern. Also, for the first time, respondents expect first-year cap rates to be lower (associated with higher value) 12 months from now. The index has remained between 55 and 57 for the past four years, a sign that the commercial real estate market is not currently overheated and should experience continued expansion over the next year. However, it is interesting to note that while the scores for the first nine questions, which relate to respondents’ businesses, generally increased, the scores for the tenth question on general sentiment continued to decrease. The low score, which is not included in the calculation of the index, may be related to overall economic and political uncertainty in the U.S. and abroad despite favorable conditions within the respondents’ markets.

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