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Despite Ongoing Market Challenges, Industry Leaders Expect Improvements in 2024
(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q1 2024 Sentiment Index confirms that commercial real estate property markets continue to experience significant challenges. At the same time, in the coming year industry executives expect monetary policy action reflecting lower inflation to bring greater stability in asset pricing and expanded availability of debt and equity capital.
Roundtable President and CEO Jeffrey DeBoer said, “Our current Sentiment Index shows improved optimism by industry leaders, compared with previous surveys that highlighted significant market concerns. The Q1 sentiment continues to note challenges presented by ongoing tight capital markets, increased operating expenses, and the continuing uncertainty of post-pandemic, in-office work. However, as the interest rate environment appears to have settled somewhat, executives are now expressing increased optimism that values and capital availability will improve in 2024.”
He added, “As we look at the current and future landscape of commercial real estate, it’s clear that we are at a pivotal moment. With nearly $3 trillion of commercial real estate loans maturing in the next four years, it remains very crucial that lenders continue to work constructively with borrowers to reflect both current and expected economic growth. Markets and asset values continue to adjust and stabilize as office use, interest rates, and inflation begin to normalize.”
All indices of The Roundtable’s Q1 Index are up, compared to the previous quarter and one year ago. The Index—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of Current and Future Economic Sentiment Indices. Any score over 50 is viewed as positive.
The Q1 Sentiment Index topline findings include:
Some sample responses from participants in the Sentiment Index’s Q1 survey include:
“Many asset classes remain strong and prices haven’t dropped significantly. I’m more optimistic for 2024 than I was for 2023.”
“There is some fresh debt capital ready to be put to work and lenders are getting more confident. On the flip side, it’s slow from a repayment perspective”
“Looking into the future, unless something happens from an interest rate or capital reallocation perspective, asset prices won’t increase much from where we’re at today.”
Regarding sentiment on the state of current asset values, 79% believe they are lower than one year ago, 8% feel they are higher, and 13% believe asset values have remained the same compared to a year ago. This contrasts with our Q1 2023 Sentiment Survey where only 39% of participants believed that asset values would be lower in Q1 2024, indicating a steep decline in perceptions of asset values.
Data for the Q1 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in January. See the full Q1 report.
The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.
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CRE Executives Express Tempered Optimism Despite High Interest Rates and Tight Liquidity
(WASHINGTON, D.C.) — Commercial real estate executives expressed tempered optimism about property markets in The Real Estate Roundtable’s Q2 2024 Sentiment Index as high interest rates and liquidity challenges linger. The Q2 Sentiment Index registered the same overall score of 61 from the previous quarter as uncertainty persists about future asset values and availability of capital.
The Roundtable’s Current Sentiment Index registered 55, a 2-point increase over Q1 2024. The Future Index posted a score of 66 points, a decrease of 4 points from the previous quarter. Any score over 50 is viewed as positive. The Overall Index this quarter of 61—a measure of senior executives’ confidence and expectations about the commercial real estate market environment—is scored on a scale of 1 to 100 by averaging the scores of the Current and Future Indices.
The Q2 Sentiment Index topline findings also include:
Some sample responses from participants in the Sentiment Index’s Q2 survey include:
“Real estate fundamentals are shaping up to be very strong in one to two years. Companies that have a long-term perspective and can be patient will benefit from strong employment growth, demographic shifts, and stable occupancies.”
“The mom-and-pop investors who own class B office are hurting the most. The institutional investors are diversified, so they are faring better.”
“Stability in asset values isn’t just about reaching pre-2022 levels; it’s about establishing a new norm based on sustainable growth.”
Data for the Q2 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in April. See the full Q2 report.
The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.
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Sentiment Index Reflects Growing Optimism Amid Persistent Market Challenges
(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q3 2024 Sentiment Index, which measures commercial real estate executives’ confidence and expectations about the industry environment, suggests a growing confidence in the future of the commercial real estate market despite ongoing challenges. The Q3 Sentiment Index reported an overall score of 64, reflecting an increase of three points from the previous quarter, and the Future Index at 70, up four points from the previous quarter. This rise in sentiment marks an 18-point increase in the overall score since last year.
Roundtable President and CEO Jeffrey DeBoer said, “The increase in our Q3 Sentiment Index indicates that while uncertainty remains, the industry is gradually regaining confidence. Leaders are seeing signs of stabilization in asset values and a potential improvement in the availability of capital, which are encouraging signals as we navigate this complex environment.”
He added, “The results of the report reflect the resilience of the commercial real estate industry. The fact that a majority of executives expect better conditions in the coming year is a strong signal that although serious challenges remain, the worst may be behind us.”
The Q3 Sentiment Index topline findings include:
Some sample responses from participants in the Sentiment Index’s Q3 survey include:
“Investors still want to allocate dollars to real estate, but there is still sentiment for defensive positioning and risk mitigation.”
“Pricing is all over the board and has reset since the post-Covid boom. The magnitude of the reset depends on where the asset is in its life cycle and its financing structure.”
“Banks have pulled back, but insurance companies have a reasonable level of capital and pricing has been stable. For higher quality assets, there’s demand.”
“Spreads are tightening on construction loans, but acquisition financing is more available. There is a lot of debt capital on the sidelines for high quality asset acquisitions.”
Data for the Q3 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in July. See the full Q3 report.
The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.
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CRE Market Reaches Turning Point: The Real Estate Roundtable’s Sentiment Index Signals Gradual Recovery Ahead
(WASHINGTON, D.C.) — The Real Estate Roundtable’s Q4 2024 Sentiment Index, reached an overall score of 73, marking its highest score since Q4 2021. The three year high reflects industry leaders’ cautious optimism that commercial real estate markets are stabilizing, showing signs of recovery and becoming well positioned for activity in 2025.
Compared to one year ago, sentiment on current conditions is up by 37 points, perceptions of future conditions is up by 20 points, and overall conditions are up by 29 points. In comparison to last quarter, sentiment on current conditions is up by 10 points, perceptions of future conditions are up by 7 points, and overall conditions are up by 9 points.
Roundtable President and CEO Jeffrey DeBoer issued the following statement:
“The notable increase in sentiment this quarter reflects a combination of factors, primarily the Federal Reserve’s rate cuts and expected future monetary easing. This action coupled with positive shifts in office leasing demand and a broader return-to-office trend are leading to greater price discovery and transaction volume. Housing supply constraints, access to energy sources, high operating expenses continue to present major challenges.”
The Q4 Sentiment Index topline findings include:
Roundtable Chair Kathleen McCarthy (Global Co-Head of Blackstone Real Estate, Blackstone) commented on the Q4 sentiment results: “The improved sentiment reflects the continuing recovery in commercial real estate, which is supported by improving liquidity in the market. This recovery will play out over time, and it is critical that we continue to support policies that help drive economic growth in communities throughout the U.S.”
Data for the Q4 survey was gathered by Chicago-based Ferguson Partners on The Roundtable’s behalf in October. See the full Q4 report.
The Real Estate Roundtable brings together leaders of the nation’s top publicly-held and privately-owned real estate ownership, development, lending and management firms with the leaders of major national real estate trade associations to jointly address key national policy issues relating to real estate and the overall economy.
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