NAIOP, the Commercial Real Estate Development Association released its CRE Sentiment Index for September 2020.
One indicator from the report showed respondents expect unfavorable conditions for commercial real estate over the next 12 months, the NAOIP said.
“Although industry professionals know more about how COVID-19 affects demand for commercial real estate than they did in the spring, uncertainty remains about when the economy will fully recover,” Thomas Bisacquino, NAIOP president and CEO, said in the report.
Respondents expressed a more negative outlook on conditions related to the performance of commercial properties than in a similar survey conducted in mid-March, just as COVID-19 was becoming widespread in the U.S. Developers/owners are asked about their own buildings or projects, all other survey participants are asked about projects they work on as well as the markets/product types they service.
They were more pessimistic about occupancy rates, face rents, effective rents, and employment within their own firms, the NAOIP stated. They also predict cap rates to rise slightly but held the same expectation in March.
Participants in the survey were less pessimistic about construction costs and the availability of financing. They 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.
“Measured separately from the components of the sentiment index, respondents’ expectations for general industry conditions rebounded to a score of 47 from a low of 38 in March. 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,” the NAOIP stated.
The survey is sent bi-annually to 10,500 U.S. NAIOP members who are developers, building owners, building managers, brokers, analysts, consultants, lenders, and investors in the office, industrial, retail and multifamily sectors. A total of 341 respondents from 266 distinct companies participated in this survey. Product types owned/under development by respondents were roughly 15 percent office, 62 percent industrial, 3 percent retail and 20 percent multifamily; western regions were slightly more represented than eastern regions, followed by the South and the Midwest.