NAIOP: Commercial Real Estate Industry Outlook Remains Positive

The NAIOP Commercial Real Estate (CRE) Sentiment Index, which predicts general conditions in the commercial real estate industry over the next 12 months, ticked slightly upwards in September, compared to six months earlier. A majority of respondents plan to hire employees, even though the cost of materials and labor related to construction continue to be causes of concern.

The Sentiment Index for September 2019, a composite of nine survey questions, rose slightly to 57 from 56 in March 2019. The sentiment is based on a 100 point scale. (An index of 50 would indicate no expected change, above 50 indicates favorable sentiment, and below 50 indicates unfavorable sentiment.)  As the Index is above 50, it indicates that the commercial real estate market is expected to continue steady, sustainable growth over the next 12 months and that overall commercial real estate development conditions are expected to improve slightly through at least the end of 2020.

Among other highlights:

  • Respondents predict increases during the next year in occupancy rates, face and effective rents, along with steadily available equity and debt financing for their own projects.
  • Over half of respondents indicate face and effective rents increasing during the next 12 months. With readings for both face rents and effective rents remaining in solidly positive territory, it appears that respondents anticipate property rental income should grow modestly over the next year.
  • Also, for the first time, a higher percentage of respondents expect first-year cap rates are to be lower (associated with higher value) 12 months from now. The change in response direction may align with recently lower interest rates.
  • The Index has remained between 55 and 57 over the past four years, a sign that the commercial real estate market is not overheated and should experience continued expansion over the next year.

“We are seeing several areas of growth, and overall stability in commercial real estate conditions across the board,” said Thomas Bisacquino, president and CEO of NAIOP. “However, there is a high degree of uncertainty driven by the 2020 U.S. election, trade policy and global economic shifts. Respondents believe the strong economy will continue to be driven by low interest rates, but many remain uncertain of a potential recession.  We are pleased that companies in the sector are hiring and foresee increased rents with strong levels of available debt and equity.”

About the Survey
The NAIOP Sentiment Survey is conducted biannually, in March and September. NAIOP conducted the first full survey in March 2016. It is sent to roughly 7,000 NAIOP members in the U.S. who are developers, investors, brokers 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).

A total of 295 distinct companies are represented in this survey. Product types owned/under development by respondents broke out to roughly 32% office, 35% industrial, 18% retail and 15% multi-family; western regions were slightly more represented than eastern regions followed by the south and the Midwest.  The response rate for this survey was 5.55% and the margin of error for the Index was 4.66%. Survey responses for this Index were gathered between September 4 and September 18, 2019.

NAIOP, the Commercial Real Estate Development Association is the leading organization for developers, owners, investors and related professionals in office, industrial, retail and mixed-use real estate. NAIOP provides unparalleled industry networking and education and advocates for effective legislation on behalf of our members. NAIOP advances responsible, sustainable development that creates jobs and benefits the communities in which our members work and live. For more information, visit

NAIOP Contact:
Kathryn Hamilton, NAIOP vice president for marketing and communications

David Harrison
Harrison Communications