Commercial real estate industry leaders continue to acknowledge the effects of the COVID-19 pandemic on various asset classes, while expressing increased optimism about market conditions for the remainder of 2021, according to The Real Estate Roundtable’s Q1 2021 Economic Sentiment Index. The March 3 Index also reports on growth potential for the industrial and multifamily sectors, while hospitality and retail continue to face challenges due to government restrictions and health guidelines.

• Real Estate Roundtable President and CEO Jeffrey DeBoer stated, "Our Q1 index indicates that despite the extremely challenging past 12 months, industry leaders are optimistic that market conditions are trending in positive way. General supply and demand market balance, functioning capital markets, and low leverage – combined with increased vaccination efforts – have sparked the strong uptick in optimism. Of course all of this is threatened if vaccinations stall overall, or if national policymakers impose new tax or regulatory burdens on the industry.”

• DeBoer also noted the positive role that real estate has played in combatting the pandemic. “Throughout the pandemic, real estate owners, managers, investors and lenders each have focused on mitigating the impact of the crisis on their residential and business tenants. The industry has restructured leases with tenants under stress, advocated for federal rental and other assistance, helped educate tenants on how to access relief, provided significant reforms to health-related building operational protocols, and issued detailed guidance to ensure safe and effective ways to re-enter buildings,” he said.

• The Roundtable’s Q1 2021 Sentiment Index registered at 59 – a fifteen-point increase from the previous quarter.  [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.]. This quarter’s Current Conditions Index of 44 increased 17 points from the previous quarter, while this quarter’s Future Conditions Index of 74, is an increase of 13 points compared to last quarter. The last time the Future Conditions Index registered at 74 was Q3 2010.
  
  The report’s Topline Findings include: 

• The Q1 2021 Real Estate Roundtable Sentiment Index registered a score of 59, an increase of 15 points from the fourth quarter of 2020. Respondents continued to express optimism about future conditions; however, the outlook is highly dependent upon asset class and portfolio mix.
  
  
• The industrial and multifamily sectors were cited as having been the most resilient to the global pandemic, and best positioned to emerge successful in a post-pandemic environment. Retail and hospitality sectors continue to face challenges stemming from public health measures and government restrictions.
  
  
• Low transaction volume has resulted in limited visibility into asset valuations over the past year. Among the trades that have occurred, industrial assets have seen their values increase, mirroring the market overall, while multifamily properties are trading at a slight discount to their pre-COVID values.
  
  
• Capital flows within the real estate market are following the sector-specific impacts of the pandemic. Most respondents cited accessible capital markets for high quality assets, particularly in the industrial and multifamily spaces. However, out-of-favor property types and strategies with leasing and/or development exposure are finding it more difficult to secure institutional equity and financing. 

Data for the Q1 survey was gathered by Chicago-based FPL Associates on The Roundtable’s behalf.  For the full Q1 report, visit here and full news release.

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