National Commercial Real Estate Sentiment Rebounds, Says Survey

The NAIOP CRE Sentiment Index, which measures industry expectations for commercial real estate market conditions over the next 12 months, has increased significantly from the last survey conducted in the Spring. The Index climbed to 56, indicating that respondents expect conditions for commercial real estate development to improve over the next year.

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. 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.

Compared with the April survey, which reflected an Index of 52, the outlook for debt availability and equity availability tied for the largest improvement. Improving expectations related to debt and equity markets are likely driven by a consensus that interest rates will decline. (Note: eight of the 496 respondents took the survey after the Federal Reserve announced a 50-basis-point rate cut on Sept. 18.)

Among the additional key findings:

• Respondents have a positive outlook for every component that comprises the Index except for construction labor costs.
• Respondents expect rising demand and valuations for commercial real estate.
• Expectations of declining interest rates are likely behind much of the improvement in the Index.
• Greater optimism about market conditions is leading developers and building owners to project that their own deal volume will grow over the next year.
• Most respondents expect to be most active in either industrial or multifamily real estate during the next 12 months

“We expect additional interest rate cuts will lead to further improvement in sentiment,” said Marc Selvitelli, president and CEO of NAIOP. “At NAIOP’s recent CRE.Converge conference, commercial real estate experts and leaders referred to growth driven by technology and AI, redefined retail, continued positive absorption in industrial and a repurposing of office buildings. We’re seeing that optimism in respondents affirming that they expect general industry conditions to improve over the next year.”

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. It asks questions about jobs, space markets, construction costs, capital markets and other conditions for real estate development. A total of 496 respondents from 374 distinct companies participated in the Fall 2024 survey.