CRE Sentiment Index Jumps 15 Points

CRE leaders are highly optimistic the markets will improve throughout 2021, with the industrial and multifamily sectors leading the way, according to The Real Estate Roundtable’s Q1 2021 Economic Sentiment Survey.

The surveys overall sentiment index registered at 59, a 15 point increase over Q4 2020. The current conditions index increased 17 from the same period, while the future conditions index registered at 74, a 13 point increase over the last quarter and the highest level since Q3 2010.

Respondents’ future outlooks vary largely depending on asset class and portfolio mix. Industrial and multifamily stand out as the sectors best positioned to thrive in a post-COVID environment, while hospitality and retail will face the most challenges moving forward.

Low deal volume has made it difficult to assess asset valuations over the last year, but among those deals that did close industrial properties registered value increases while multifamily properties are trading at a small discount. And capital is available on a sector-specific basis, with the capital markets flowing freely for high-quality industrial and multifamily assets. Property types with higher leasing and development exposure have less access to institutional financing.

“Throughout the pandemic real estate owners, managers, investors and lenders each have focused on mitigating the impact of the crisis on their residential and business tenants,” said Real Estate Roundtable President and CEO Jeffrey D. DeBoer. “The industry has restructured leases with tenants under stress, advocated for federal rental and other assistance, helped educate tenants on how to access relief, provided significant reforms to health related building operational protocols, and issued detailed guidance to ensure safe and effective ways to re-enter buildings.”

DeBoer also noted that despite the last year, industry leaders believe market conditions will continue to trend positively.

“General supply and demand market balance, functioning capital markets, and low leverage, combined with increased vaccination efforts have sparked the strong uptick in optimism,” he said. “Of course all of this is threatened to be reversed if vaccinations stall overall, or if national policymakers impose new tax or regulatory burdens on the industry.”