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Outlook for CRE Finance Grows Increasingly Positive

Industry leaders in commercial real estate finance are taking an increasingly positive view of the near-term outlook, judging by the results of CREFC’s second-quarter Sentiment Index Survey and Special COVID-19 Survey. Eighty-three percent of CREFC’s Board of Governors (BOG) have an overall positive sentiment for all CRE finance business over the next 12 months, up from 72% in Q1.

Adding to the continued confidence this quarter is the BOG’s diminishing negative outlook on CRE fundamentals and their impact on the performance of CRE finance-related business. Only 10% held a negative view of CRE fundamentals, compared to 13% in Q1 and down from 43% in Q4 2020. 

The primary area of concern expressed by BOG members was the potential for government policy and regulation to negatively impact the performance of all CRE finance-related business. That sentiment was expressed by 30% of BOG members surveyed this quarter, up from 13% three months ago.

“As restrictions are lifted in states across the country and the economy reopens, we are hopeful for a strong recovery with investors eager to move off the sidelines,” said Lisa Pendergast, executive director of CREFC. She added that the council would monitor “any and all decisions out of Washington that could impact the industry and will provide our members with the most up to date analysis possible.”

Along with the longer-standing BOG Sentiment Survey and Index, CREFC introduced an incremental survey beginning in Q1 2020 focused specifically on the impact of the COVID-19 pandemic on CRE. The latest COVID Survey reflects a continued upbeat outlook, says CREFC. Highlights include the following:

• Nearly a third (31%) of BOG members say they’re seeing more transaction and lending activity now than they did than before the pandemic.

• Eighty-eight percent of CREFC’s lenders reported that their lending programs are fully operational, up from 71% in Q1, and only 5% indicated no new lending.

• Most BOG members (81%) expect a fast recovery for leisure travel, up from 76% in Q1. Conversely, just 14% of members expect the same of corporate travel.

• Retail is joined by office (69%) as the property type that BOG members are most worried about post-pandemic. Eighty-three percent believe usage of office and retail will change as a result of the pandemic.

• By asset class, the BOG (48%) sees retail as faring the worst and industrial (81%) outperforming all other asset classes during the pandemic. These views remain consistent as the pandemic recedes, with the BOG (88%) expecting retail to fare the worst and industrial (62%) to continue to outperform.

“Retail and hotel remain the most stressed in the economic wake of the pandemic, and the survey indicated concerns surrounding office performance post-COVID,” said Eric Thompson, BOG chair-elect. “However, foreclosure and REO assets have remained relatively low, and at levels well below those expected early in the crisis.” 

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Financing
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