The commercial real estate trade group known as NAIOP recently
released its latest update on industry sentiment showing improving
attitudes and optimism about the near-term outlook. The group’s
latest commercial real estate sentiment index is 56, up slightly from
April when it last took the industry’s temperature. Any number over 50
indicates optimism, while an index score below 50 indicates an
unfavorable outlook for the coming 12 months. This fall’s number
is higher than at any point since the COVID-19 pandemic began in early
2020 and matches a level last observed in March 2019. The overall
outlook remains positive for most market conditions, and sentiment has
improved since April for occupancy rates, rents, capitalization rates
and hiring. Over the next year, 62.7% of respondents expect to be most
active in industrial projects and deals, while 22.6% expect to be
most active in multifamily transactions, 11.9% in office transactions
and only 2.8% say that they will focus primarily on retail. Some
indicators — such as those measuring the prospects for effective rents,
available equity and occupancy rates — have seen noticeable
improvements, according to the update. But industry leaders still worry
about the cost of construction materials and labor, and they are less
optimistic about the availability of financing.
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