National CRE News In Your Inbox.
Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.
CREFC Sentiment Index Reaches Highest Level on Record
The CRE Finance Council (CREFC) said its Third-Quarter 2024 (3Q 2024) Board of Governors (BOG) Sentiment Index survey rose to 121.1, up approximately 18% from the second quarter for the highest reading since the survey was launched at the end of 2017. CREFC said the result reflects significant optimism over the Federal Reserve’s easing of interest rates, the potential for a U.S. economic soft landing and the impact on both commercial real estate assets and lending market conditions.
Drilling down into the survey, conducted just before the Fed enacted its 50-basis-point cut, the results were as follows:
- Economic Outlook: Some 32% of respondents expect improved performance over the next 12 months, up from 11% in the prior quarter. Only 11% now anticipate worsening conditions.
- Rate Impact: Eighty-five percent of respondents expect lower mortgage and capitalization rates to positively impact CRE finance and CRE asset values, a substantial increase from 41% last quarter.
- CRE Fundamentals: Confidence in CRE fundamentals improved, with 40% predicting better conditions over the next year, up from 24% previously.
- Transaction Activity and Financing Demand: Investor demand for CRE assets is expected to grow, with 81% anticipating increased demand, up from 54% last quarter. Borrower demand for financing also rose, with 85% projecting higher loan demand compared to 65% last quarter.
- Liquidity and CMBS Market: Confidence in liquidity improved significantly, with 77% expecting better/more liquid market conditions in the debt capital markets, up from 46% in the prior quarter.
- Optimistic Industry Sentiment: Industry sentiment was markedly more positive, with 57% expressing a positive outlook, up from 22% in the previous quarter, with negative sentiment dropping to 2%.
“The latest survey results signal a strong resurgence of confidence within the CRE finance industry,” said Lisa Pendergast, CREFC executive director. “Expectations of further Federal Reserve easing, combined with increased investor and borrower demand, suggest market participants are preparing for growth and opportunity through year-end and into 2025. While challenges remain —particularly in the office sector — the overall outlook is more optimistic than in previous quarters.”
- ◦Financing
- ◦Economy
