The NAIOP CRE Sentiment Index

Release Date: Fall 2018

NAIOP Sentiment Index

Download the Fall 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, operators and brokers. 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 September 2018 (a composite of nine survey questions), showed positive changes in seven of the nine questions that underpin the Index. This survey’s 0.66 Sentiment Index reading is the highest posted since the full survey commenced in March 2016. The results of the individual questions in the survey are fairly consistent with responses posted over the five previous surveys, but in the aggregate, there is more support for the notion that the fundamentals underpinning commercial real estate will be stronger in 12 months than they are today. This consistent, positive Index level over the past 36 months is a sign that the greater commercial real estate market has been operating at a steady pace and it is expected to support continued expansion for at least 12 more months.

Notable Changes From the March 2018 NAIOP CRE Sentiment Survey

The most positive changes in the survey that helped keep the Index above zero were positive expectations regarding the availability of capital (both debt and equity), as well as the outlook that effective rents will rise over the next 12 months. Year-over-year, the readings for the availability of equity and debt capital increased by 2.50 percent and 2.80 percent respectively, and the prospects for effective rents increased by 2.50 percent. This continues the strong reversal for both capital sources after each slid consistently between March 2016 and March 2017. Anticipated levels for effective rents are at their highest since March 2016. At the same time, however, respondents are still greatly concerned about the costs of construction materials and labor as indicated by the lowest score recorded for each category since the survey started.

Agreement/Disagreement Among Respondents

The most consistent responses (meaning there was the most agreement among survey participants) were in the categories of face rents and the availability of both equity and debt capital sources. Scores for these categories were highly positive contributors to the overall Sentiment Index. Readings for these categories have risen over the past year, and the outlook for the availability of debt and equity sources has improved consistently since early 2017. The questions with the least consistent responses (most dispersion) among survey participants regarded employment, construction materials and construction labor costs. The 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, and the construction-related readings are consistent with a steadily growing economy over the past six months, with 2.2 percent annualized GDP growth in the first quarter of 2018 and 4.2 percent growth in the second quarter of the year.

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