CREFC’s third-quarter 2023 Board of Governors Sentiment Index survey indicates a cautious upward trend in the commercial real estate finance market. The index, which measures senior members’ perceptions of market conditions and outlook, rose by 5% to reach 82.7 from the previous quarter’s index of 78.5.
Although there has been an overall improvement in sentiment towards CRE finance businesses, a significant portion (58%) still holds a negative outlook. However, this is lower than the previous quarter’s figure of 67%.
Key findings from CREFC include:
Economic Performance: While expectations for the U.S economy over the next year remain subdued, there has been a decrease in respondents anticipating worsening conditions (44% compared to Q2’s figure of 55%).
Policy Impact: The sector expects federal legislative and regulatory actions to have more negative effects with an increase from Q2’s figure (56% compared to Q2’s figure of49%).
CRE Fundamentals: There is slow but steady optimism returning as more respondents anticipate improvements or no changes in fundamentals.
Investor and Financing Demand: Optimism grows for both increased investor demand for CRE/multifamily assets and borrower demand for CRE/multifamily loans/financing.
Liquidity Expectations: A significant shift towards positive or neutral views on increased liquidity within capital markets.
CMBS Capital Markets : Positive sentiment increases regarding CMBS impact on CRE CLO demand/spreads.
The survey results reveal that despite some cautionary sentiments among senior members in commercial real estate finance, there are signs pointing towards gradual improvement moving forward.
