Past Indexes and Understanding the Index
Understanding the Index
The NAIOP Sentiment Survey is conducted biannually, in March and September. This 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. For the first time, it was also sent to roughly 2,000 commercial real estate brokers, bringing the target list to 7,000. 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 question, the Index would be positive 5. Conversely, if all of the participants chose the most pessimistic response to each 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).
Changes in the scores of the individual survey questions between the March 2018 and the September 2018 surveys ranged between -1.00 percent and +2.50 percent. This is typical of what was seen in all surveys since March 2016, with the exception of the September 2017 survey. The overall composite index for September 2018 (0.66) increased by 2.00 percent since March 2018 (0.46) and increased by 1.70 percent since September 2017 (0.49), and it has been at or above this positive level since March 2016. The current survey indicates that there appears to be optimism in the CRE industry due to mostly positive CRE metrics with the noted exceptions of construction labor and materials costs (negative influences). The margin of error for this survey is 4.84 percent.
A total of 287 distinct companies were represented in this survey. Product types owned/under development by respondents broke out to roughly 31 percent office, 37 percent industrial, 17 percent retail and 15 percent multifamily; western regions were more represented than eastern and southern regions, followed by the Midwest. The response rate for this survey was 5.78 percent and the margin of error for the Index was 4.84 percent — both of which were declines from the March 2018 survey.
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.