The NAIOP CRE Sentiment Index

Release Date: Fall 2020

Index Score

Download the Fall 2020 NAIOP CRE Sentiment Index Report. 

Key Findings

The NAIOP CRE Sentiment Index for September 2020 is 45, matching March’s reading. This indicates that respondents expect unfavorable conditions for commercial real estate over the next 12 months (see Figure 1).

Figure 1

Relatively high standard deviations in survey results suggest continued uncertainty about future industry conditions. Although respondents know more about COVID-19 and its immediate effects on the economy than they did in March, it remains difficult to predict the duration of the pandemic or the shape of the economic recovery. 

Greater-than-usual differences between respondents may also reflect the markets and property types in which they are active. The NAIOP CRE Sentiment Index measures sentiment across the U.S. commercial real estate industry as a whole, rather than focusing on any individual sector or market, but respondent comments suggest a more favorable outlook for industrial and multifamily properties than retail or office properties. 

Respondents expressed a more negative outlook on conditions related to the performance of commercial properties than in March. They were more pessimistic about occupancy rates, face rents, effective rents, and employment within their own firms (see Figure 3). Respondents also predict cap rates to rise slightly, but they held the same expectation in March. 

On the other hand, respondents are less pessimistic about construction costs and the availability of financing. Respondents expect debt to be about as available in 12 months as it is now, and for equity to be slightly more available. While respondents predict construction labor and material costs to be higher than they are currently, they expect these costs to rise less rapidly than in March and much less rapidly than in earlier surveys.

Respondent expectations for general industry conditions rebounded to a score of 47 from their low of 38 in March (see Figure 2). Measured separately from the components of the sentiment index, the alignment of this score with the index indicates that respondents’ general outlook for the commercial real estate industry is much closer to their expectations for their own properties and markets than in March.

Figure 2

Graphs and Observations

See the composite scores for the individual components in past surveys and new data on expectations for development and comparisons among professions and property types.

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