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Survey Report: Cautious CRE Optimism in 2024
Since 2020, commercial real estate has faced multiple challenges on the health and economic fronts. This, in turn, has led to “significant swings in sentiment” in the RCLCO Investment Survey.
But the organization’s Current Real Estate Market Survey, released in late December, demonstrated a “more encouraging” future outlook. The main positive note was that “a large share of respondents predict that real estate markets will be better over the next six to 12 months,” according to a survey write-up.
Other takeaways from the survey results included the following.
A Flat Real Estate Market Sentiment Index
The RCLCO Current Real Estate Market Sentiment Index (RMI) is measured on a 100-point scale. During the past six months, concluding at the year-end 2023, the scale stood at 15.47. RCLCO said an RMI less than 40 is “typically consistent with a period of real estate market distress/recession.”
But respondents also believe that the index will increase by nearly 30 points over the next year to 45.1, or “out of the distress/recession zone,” RCLCO noted
A National Recession? Possibly Not
Meanwhile, 29% of respondents feel a recession is unlikely over the next two years. In contrast, 23% believe we’re currently in a recession; 37% noted that we could be one within the next year. Though most respondents indicated that a recession would occur, 5% “believe the severity will be greater than a -2 % decrease in GDP,” RCLCO pointed out.
Downturns in Asset Types
Respondents also noted that:
- The for-sale housing market has moved into downturn territory but could recover in the next 12 months
- Multifamily rental housing has entered a complete downturn
- Most of the real estate sectors will be in some stage of downturn, “though some niche sectors such as self-storage, lifestyle and grocery/necessity retail, and industrial are anticipated to have more resilience”
- Office is anticipated to have the most significant overall value decline
Economic Viewpoints
When it came to economic sentiment:
- 53% of respondents said interest rates will decrease, while 35% forecast that interest rates will stay the same
- 35% of respondents predicted a cap rate increase, 24% said cap rates would decrease, and 35% forecast rates staying the same
- 54% believed inflation will decrease moderately, 26% said it will stay the same, with 12% predicting a moderate inflation increase
Meanwhile, compared to results from mid-year 2023, opinions have shifted more positively related to capital flows to real estate, with a greater number expecting an increase,” RCLCO added.
- ◦Sale/Acquisition
- ◦Financing
- ◦Economy
- ◦Policy/Gov't
