Commercial Real Estate Industry Sentiment on the Rise

(SasinParaksa -

Improving economic conditions have led to a significant increase in the NAIOP CRE Sentiment Index, indicating both overall optimism and several ongoing concerns. The NAIOP CRE Sentiment Index for April 2021 reached 54, significantly higher than the August/September 2020 reading of 45, which reflected a generally negative outlook for conditions.

This latest reading indicates that respondents expect conditions for commercial real estate to improve over the next 12 months. Respondents now expect improvement in occupancy rates, rents, the availability of equity and debt, and employment within their own firms. On average, survey-takers expect cap rates to remain unchanged.

Respondents are more pessimistic about construction costs, however. 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. “We appear to be emerging from the pandemic, finally, with pent-up demand for goods and services and increasing reliance on delivery, which bodes well for the industrial and warehouse sector,” said Thomas J. Bisacquino, president and CEO of NAIOP. “Some mixed signals, and dramatic shortages in construction materials, remain indicative of ongoing market insecurity.”

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. “With Chairman Jerome Powell committing to hold interest rates low for the next two years and with business beginning to open up the more people are vaccinated, I believe that Q4 of 2021 and all of 2022 will be filled with high consumption and more demand for logistics buildings,” said one respondent.

A majority (57%) 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.

A total of 407 respondents from 342 distinct companies participated in this survey. When individuals were asked what property types they worked on, 75.4% indicated they work on industrial properties; 70.2% work on office properties; 48.3% work on retail properties; and 44.6% work on multifamily properties. A regional breakdown shows that 48.0% of respondents are active in the West, 45.3% are active in the East, 39.7% are active in the South, and 29.3% are active in the Midwest.

NAIOP, the Commercial Real Estate Development Association, is a non-profit organization for developers, owners, investors and related professionals in office, industrial, retail and mixed-use real estate. NAIOP provides industry networking and education and advocates for effective legislation on behalf of its members. For more information, visit