CREFC Sentiment Index Takes Sharp Negative Turn

The CRE Finance Council (CREFC) said its First-Quarter 2025 Board of Governors Sentiment Index fell 30.5% to 87.9 from 126.6 in Q4 2024, the second-largest drop on record and exceeded only by the onset of the pandemic in Q1 2020. The decline brings the index below the baseline of 100 for the first time since the pandemic era and reflects growing concerns over economic uncertainty triggered largely by recent trade policies that have led to heightened market volatility.

Among other highlights, the index shows 80% of survey respondents expecting economic conditions to be worse over the next 12 months, compared with 12% in the previous quarter. Fifty-nine percent expect negative impacts from government actions, up from 2% in Q4 2024. Half the respondents expect commercial real estate fundamentals to worsen, compared to 12% last quarter, while just 17% expect fundamentals to improve, down from 65%.

Lisa Pendergast, president and CEO of CREFC, said, “The CRE finance industry finds itself at a genuine crossroads. The dramatic drop in our Sentiment Index clearly signals concern, but beneath the headline numbers we see pockets of cautious optimism, particularly regarding how lower interest rates might finally break the transaction logjam that has persisted through much of 2024. What makes this quarter’s survey particularly revealing is the stark contrast to last quarter’s record high sentiment, demonstrating how quickly market psychology can shift with changing economic policies.”