Commercial Real Estate Sentiment Index Points to Worsening Conditions

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MAY 4, 2023 – WASHINGTON, D.C. –The NAIOP CRE Sentiment Index is 47, indicating that respondents expect conditions for commercial real estate to worsen over the next 12 months.

According to the survey:

  • Respondents expect debt and equity to be less available in the future and for cap rates to rise. Commercial real estate practitioners forecast a decline in occupancy rates and a slight decline in effective rents. Developers and building owners also predict that economic conditions will be slightly less favorable in the markets in which they are active, suggesting a more challenging operating environment.
  • Reflecting growing concern about market conditions, developers and building owners expect to initiate a smaller volume of new projects and acquisitions over the next year. They project a sharper decline in the dollar value of these projects (score of 41) than in any previous survey since this question was first asked in March 2020.
  • Most respondents (54.3%) 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 (31.7%), followed by office properties (7.5%) and retail properties (6.5%).
  • For the first time since the survey’s inception, respondents do not expect construction material costs to rise over the next year. They continue to predict that construction labor costs will increase, though at a slower rate than previously predicted.

“Construction costs do seem to be moderating,” said NAIOP President and CEO Marc Selvitelli. “However, our members remain wary of the strength of the overall economy.” Developers and building owners expect economic conditions in their local markets to be somewhat unfavorable over the next year. Survey respondents are predicting stable employment levels at their own firms.

The NAIOP CRE Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months by surveying industry professionals on the future conditions of their projects and markets. The survey includes questions about jobs, space markets, construction costs, capital markets and other real estate development fundamentals. If every participant in the survey selected the most optimistic answer to every question, the index would be 100. Conversely, if all the participants chose the most pessimistic response to every question, the index would be 0.  

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About NAIOP: 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
703-904-7100, ext. 165

David Harrison
Harrison Communications