The NAIOP CRE Sentiment Index

Release Date: Spring 2021

Sentiment Index Score

Download the Spring 2021 NAIOP CRE Sentiment Index Report. 

Key Findings

The NAIOP CRE Sentiment Index for April 2021 is 54, significantly higher than the August/September 2020 reading, and a return to positive sentiment. This indicates that respondents expect conditions for commercial real estate to improve over the next 12 months (see Figure 1).

Figure 1

Respondents expect most conditions to improve over the next year. In contrast with a generally negative outlook for conditions in the previous survey, respondents now expect improvement in occupancy rates, rents, the availability of equity and debt, and employment within their own firms (see Figure 3). On average, survey-takers expect cap rates to remain unchanged.
On the other hand, respondents are now more pessimistic about construction costs. Most expect construction labor costs to increase, and sentiment about construction materials costs is now more pessimistic than in any prior survey. A worsening outlook for costs likely reflects current labor and material shortages but may also indicate a consensus that demand for construction will grow over the next year.
Respondents expect greater improvement in general industry conditions than for any of the individual factors that comprise the CRE Sentiment Index. This may reflect optimism about factors that the index does not directly measure, such as general economic conditions. A score of 66 indicates respondents now expect a greater improvement in general industry conditions than in any previous survey (see Figure 2).
Although respondents are broadly more optimistic, high standard deviations in survey results suggest continued uncertainty about the future. Varying degrees of optimism among respondents may also reflect a more challenging environment for some property types and geographic markets. As in the last survey, open-ended comments suggest a brighter outlook for industrial and multifamily properties and continued difficulty for retail properties.
A majority (57.0%) of respondents expect to be most active in projects or transactions related to industrial properties over the next year. Multifamily properties attracted the next largest share of interest (20.9%), followed by office properties (17.2%). Only 4.9% of respondents indicated that they expect to be most active in retail properties.

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.

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Past Indexes and Understanding the Index

The biannual survey is sent to NAIOP member developers, owners, building managers, brokers, analysts, consultants, lenders and investors.

Read more about Past Indexes and Understanding the Index