Past Indexes and Understanding the Index

Past Indexes

Understanding the Index

The survey’s final question about overall sentiment regarding future conditions is designed to serve as a verification of the Sentiment Index and is not included in the calculation of the Index. The score for the final question is 0.33 (a weak but positive expectation), while the Index is slightly higher at 0.47. When responses to the first nine questions — which relate to real estate fundamentals — are combined into the composite Index, the result is slightly more positive than when respondents were asked a single, subjective question.

The NAIOP Sentiment Survey is conducted biannually, in March and September. The survey is sent to roughly 5,000 NAIOP principal members in the U.S. who are developers, investors and operators in the office, industrial, retail and multifamily sectors. It asks 10 questions about jobs, the space markets, construction costs and the capital markets. Respondents indicate whether their 12-month outlook for each category is positive, negative or neutral. The responses are not equally weighted. Instead, weighting varies based on whether the responses to a question are tightly packed or dispersed. Questions with tightly packed responses (meaning there is more consistency among the answers to that question) are more heavily weighted than those with more dispersed responses (which indicate less consistency).

If every participant in the survey selected the most optimistic answer to each and every question, the Index would be positive 5. Conversely, if all of the participants chose the most pessimistic response to each and every question, the Index would be negative 5. The Index is on a 10-point scale, meaning that changes to the composite scores — and the Index itself — will range between zero and 10. A one-point change in the Index equates to a 10 percent change (on an absolute basis).

The changes to the scores for the questions between March and September 2016 ranged between 0.20 and 3.50 percent, a more narrow range than that recorded between September 2015 and March 2016 of 0.20 and 9.50 percent. In September 2016, the composite index declined by just 1.30 percent (from 0.60 to 0.47 points) compared to a 3.30 percent decline between September 2015 and March 2016.

The response rate for this survey was 7.30 percent and the margin of error for the Index was 5.19 percent. Survey participants are sent a three-page summary of results showing the percentage breakdown of responses to each question just three days after the survey closes. This report is released to all NAIOP members and the public three weeks later. Survey responses for this Index were gathered Sept. 7-9, 2016. The first two readings in this survey were beta tests sent to 600 NAIOP members in February and September 2015, generating response rates of 17.29 and 17.00 percent, respectively. Comparing this survey to the prior beta tests, respondents’ consistency across questions was nearly the same, with face rents being the most consistently answered question and construction materials and labor costs being the least consistently answered questions. As such, March and September 2016 results did not vary significantly from those in the beta tests.