Commercial real estate has faced numerous challenges on both the health and economic fronts since 2020. This has resulted in significant fluctuations in sentiment, as seen in the RCLCO Investment Survey.
However, according to the organization’s Current Real Estate Market Survey released at the end of December, there is a more encouraging outlook for the future. The survey write-up states that a large portion of respondents predict an improvement in real estate markets over the next six to 12 months.
The survey also revealed several key takeaways:
– The RCLCO Current Real Estate Market Sentiment Index (RMI), measured on a scale of 100 points, stood at 15.47 during the past six months leading up to year-end 2023.
– Respondents believe this index will increase by nearly 30 points within one year and reach a score of 45.1 – indicating that we are moving out of distress/recession territory.
– While most respondents anticipate some form of recession occurring within one year, only about five percent believe it will be severe with GDP decreasing by more than two percent.
– Asset types such as for-sale housing and multifamily rental housing have entered downturn territory but may recover within one year.
– Most sectors are expected to experience some level of downturn; however niche sectors like self-storage,lifestyle retail,grocery/necessity retail,and industrial are predicted to have greater resilience compared to others like office which is anticipatedto see significant declinesin overall value.
In terms offutureeconomic conditions:
53%ofrespondentsexpectinterestratesdecreasewhile35%predicttheywillremainthesame
35%ofrespondentsforeseecaprateincreases24%saycaprateswilldecreasewiththeremaining35%expectingthemtostaythesame
54%donotethatinflationwillmoderatelydecrease26%saiditwouldstaythesamewhile12%predictamoderateincrease
Compared to results from mid-year 2023, there has been a more positive shift in opinions regarding capital flows into real estate, with a higher number of respondents expecting an increase. These findings demonstrate cautious optimism for the commercial real estate market in 2024.
This report was originally published on Connect CRE.
