The CRE Finance Council (CREFC) has announced the results of its fourth quarter 2023 Board of Governors (BOG) Sentiment Index survey. The results show overall optimism on the part of the board.
The Board of Governor Sentiment Index survey was administered between December 18, 2023, and January 3, 2024. It serves as a gauge of market conditions and outlook of the sector, based on input by senior members in the industry.
The fourth quarter 2023 index represents input from 95% of the Board of Governors. It showed a significant upturn, a 33% increase, from the previous quarter. According to the report, this leap marks the largest quarterly increase since the survey’s inception. This indicates a notable shift in industry sentiment.
Key highlights from the fourth quarter survey’s core questions were noted. These include economic optimism, with a noted increase in positive outlook for the U.S. economy in the next 12 months. In addition, 54% of respondents are expecting improved performance in the sector compared to just 7% in the previous quarter, a significant increase.
In addition, the survey recorded more positive or neutral views overall regarding mortgage/cap rates on CRE finance-related businesses. There were also more positive views towards expectations for CRE fundamentals and investor demand for CRE/multifamily assets.
In other areas of the survey, a significant rise in anticipated borrower demand both for financing and liquidity in the CRE debt capital markets was noted. A significant increase in positive sentiment toward CMBS and CRE CLO demand/spreads was reported, as well.
Overall, only 19% of the BOG held a negative sentiment for all CRE finance businesses over the next 12 months. In the prior quarter, 58% felt the same.
The survey’s core questions represented a mostly positive picture. However, the additional open-ended responses uncovered some concerns. These concerns included: apprehensions about rate cuts in a slowing economy, multifamily sector challenges, and uncertainties in both financing and liquidity. In addition, concerns were reported regarding the potential for increased inflation, slower GDP growth, and sector-specific issues like multifamily oversupply and office sector stagnation.
Despite these legitimate concerns, the overall view appears positive and optimistic among the BOG for the upcoming year, despite evolving economic conditions.
“The significant rise in the Sentiment Index underscores a cautiously optimistic outlook in the CRE finance industry,” said Lisa Pendergast, Executive Director of CREFC.