**CREFC Sentiment Index Takes Sharp Negative Turn in Q1 2025**
The CRE Finance Council (CREFC) reported a significant decline in its First-Quarter 2025 Board of Governors Sentiment Index, which fell 30.5% to a reading of 87.9, down from 126.6 in Q4 2024. This marks the second-largest quarterly drop on record, surpassed only by the initial onset of the COVID-19 pandemic in Q1 2020. The decrease pushes the index below the baseline of 100 for the first time since the pandemic, signaling growing unease in the market attributed to economic uncertainty and increased volatility stemming largely from recent trade policy developments.
Key findings from the index include:
– 80% of survey respondents expect economic conditions to worsen over the next 12 months, up sharply from just 12% in the prior quarter.
– 59% anticipate negative impacts from recent government actions, a dramatic rise from only 2% in Q4 2024.
– Half of the participants expect commercial real estate fundamentals to deteriorate, compared to 12% last quarter.
– Only 17% foresee an improvement in CRE fundamentals, down from 65% previously.
Lisa Pendergast, President and CEO of CREFC, commented on the new data:
“The CRE finance industry finds itself at a genuine crossroads. The dramatic drop in our Sentiment Index clearly signals concern, but beneath the headline numbers we see pockets of cautious optimism—particularly regarding how lower interest rates might finally break the transaction logjam that has persisted through much of 2024. What makes this quarter’s survey particularly revealing is the stark contrast to last quarter’s record high sentiment, demonstrating how quickly market psychology can shift with changing economic policies.”
The report highlights a rapidly evolving economic landscape, with industry sentiment swinging dramatically in response to policy shifts, market dynamics, and macroeconomic signals.
