CREFC Finds Lack of Coherent Fiscal and Monetary Policies a Concern
Some view the government as a potentially adverse player.
Sentiment improved but it remains cautious among the CRE Finance Council (CREFC) board of governors according to its latest index for the third quarter.
The 3Q 2023 Index increased to 82.7, up 5% from 78.5 in the prior quarter, with 58% expressing a negative outlook, down from 67% in the prior quarter.
The index was taken from Sept. 12 to Sept. 22 and showed incremental improvement in the outlook for CRE fundamentals, liquidity, and the CMBS capital markets.
Respondents spoke less favorably about how government action can help the situation.
Among its thoughts were that the regulatory landscape for the CMBS industry is somewhat discouraging and a lack of coherent fiscal and monetary policies is a concern.
“Partisan politics and the inability to pass meaningful policies in Congress could be problematic for the industry,” the report said. There’s been “apprehension about political maneuvering for votes and non-productive posturing, especially as the election cycle approaches.”
CREFC pointed out that the increasing national debt is perceived as “a potential drag on the economy, mainly due to rising interest payment costs.”
Even more so, some view the government as a potentially adverse player because of concerns that the government’s actions show it to be unfavorable to free markets.”
Nonetheless, when asked to assess the current CRE landscape compared to expectations six months ago, the BOG identified key happenings such as fewer defaults than expected currently but offered a prediction for more in 2024 and that elevated uncertainty remains about the economy’s trajectory.
Related to individual sectors, it expressed an increase in concerns about the multifamily sector, such as low but increasing mortgage delinquencies, doubling borrowing costs, slowing rent growth, and rising building expenses.
“Outstanding multifamily mortgages more than doubled over the past decade to about $2 trillion – nearly twice the amount of office debt,” according to the report.
It added that industrial and life sciences are expected to perform well, whereas office properties will remain challenged.