Survey Finds Optimism on Commercial Real Estate’s Near-Future

Commercial real estate executives are mostly positive in what the next 12 months will bring to their industry, according to the Fall 2016 Sentiment Index Report issued by NAIOP, the Commercial Real Estate Development Association.

NAIOP’s Sentiment Index for the fall registers at 0.47, which means commercial real estate executives polled for the index believe the next 12 months will be favorable and slightly better than current conditions. The main factors driving this positive attitude were the expectations for a slower increase in construction costs and the prediction that cap rates would increase at a lesser rate than they expected six months ago. However, NAIOP noted that the industry sentiment has become less steady compared to earlier index reports, adding that respondents believed the market “is approaching a period of slowing growth.”

Respondents also stated they expected to see increases in their internal hiring and rents in the next 12 months, although there was concern on available debt and equity. There was also the prediction that first-year capitalization rates would be higher over the coming year, which NAIOP attributed to the anticipation of “slightly more risk, a slight increase in interest rates or both.”