The NAIOP CRE Sentiment Index

Release Date: Spring 2018

NAIOP Sentiment Index

Download the Spring 2018 NAIOP CRE Sentiment Index Report. 

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 and operators. 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.

NAIOP Sentiment Index Graph

Key Findings

The NAIOP CRE Sentiment Index for March 2018, a composite of nine survey questions, showed little change, decreasing slightly over six months to 0.46 from 0.49. The results are fairly consistent with responses posted over the four prior surveys (going back to March 2016) indicating an expectation of continued but slow growth over the next 12 months. Since the composite Index is greater than zero, this indicates that respondents believe, as a group, that general market conditions over the next 12 months will continue to be favorable for the commercial real estate (CRE) industry.

Furthermore, overall commercial real estate development conditions will be even better in 12 months (March 2019) than they are today. This consistent, positive Index level over the past 24 months is a sign that real estate development is not overheating and should support an extended real estate market expansion for at least 12 more months.

Notable Changes From the September 2017 NAIOP CRE Sentiment Survey

The two most positive changes in the survey that helped keep the Index above zero were expectations regarding the availability of both debt and equity over the next 12 months. Year-over-year, the readings for the availability of equity and debt increased by 5.00 percent and 6.70 percent respectively. This is a continuation of the reversal for these two categories after both slid consistently between March 2016 and March 2017. At the same time, however, respondents are still greatly concerned about the costs of construction materials as indicated by the 5.00 percent slide in the reading. Of note is that the score of the labor cost question did not change over six months (-2.43) and remains the lowest number in the survey.

Agreement/Disagreement Among Respondents

The most consistent responses (meaning there was the most agreement among survey participants) were in the categories of occupancy, rents and capital sources. Scores for these categories were highly positive contributors to the overall Sentiment Index. Readings regarding occupancy rates, face rents and effective rents have fallen slightly over the past year, but the outlook for the availability of debt and equity capital sources has rebounded nicely to levels not seen since the September 2015 survey. The questions with the least consistent responses (most dispersion) among survey participants regarded employment and construction labor costs.

These employment-related readings are consistent with the uneven real estate- related job growth that has occurred in various regions across the country over the past few years.

Graphs and Observations

See the 10 survey questions and composite scores for each.

Read more about Graphs and Observations

Past Indexes and Understanding the Index

The biannual survey is sent to NAIOP member developers, owners and investors.

Read more about Past Indexes and Understanding the Index

Distinguished Fellows

The data is compiled and analyzed by Thomas Hamilton, Ph.D., MAI, CRE, and Gerald Fogelson Distinguished Chair in Real Estate at Roosevelt University in Chicago. The survey questions and statistical methodology were created, refined and finalized between 2014 and 2016 by the NAIOP Distinguished Fellows listed on the online NAIOP Sentiment Index.

Read more about Distinguished Fellows