NAIOP Sentiment Index Enters Negative Territory for First Time
The NAIOP CRE Sentiment Index, based on a survey of real estate practitioners, has dropped below 50 for the first time since its inception in 2016. However, NAIOP says that because the survey was conducted March 11-25 as the nation was rapidly reacting to the COVID-19 pandemic, the long-term outlook is better understood as a snapshot of industry sentiment than as a reliable predictor of future market conditions.
The NAIOP CRE Sentiment Index for March 2020 is 45—a substantial drop from 57 in September 2019. A score below 50 indicates unfavorable CRE conditions are expected in 12 months.
The average sentiment for employment, for example, dropped from 74 in September 2019 to 51 in March 2020, and the average sentiment for available equity and available debt also dropped sharply. However, the outlook for construction material costs and construction labor costs improved, which could mean that respondents believe there will be less demand in these areas due to a slowdown in the construction industry.
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