Economic uncertainties and evolving policy landscapes continue to dampen outlook
The CRE Finance Council (CREFC) has released its latest industry sentiment index, revealing a cautious yet modest recovery in market confidence in the second quarter.
The survey, which captures the perspectives of industry stakeholders (lenders, investors, and rating agencies), provides valuable insights into key areas of concern, including the economy, policy impact, rates, CRE fundamentals, transaction activity, financing demand, liquidity, and CMBS capital markets.
About 67% of the respondents gave a negative outlook, 25% maintained neutrality, and only 8% expressed positive sentiment. While the negative sentiment persists, CREFC noted the overall index value increased to 78.5 from 67.5 in the first quarter, suggesting a more positive outlook for the sector.
Respondents had mixed expectations for the US economy, with 10% predicting improvement, 35% expecting little change and 55% foreseeing worsening conditions. Policy-wise, 4% anticipated a positive effect from legislative and regulatory actions, 47% anticipated neutrality, and 49% expected negative consequences. Mortgage rates and cap rates were viewed negatively by 65% of respondents, although this improved from the previous quarter’s 88%.
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Expectations for CRE fundamentals stayed pessimistic, with 84% predicting a worsening situation, and investor demand for commercial real estate and multifamily assets saw 29% anticipating a decrease. Meanwhile, borrower demand for CRE and multifamily loans/financing was expected to increase by 53% of respondents, reflecting a positive trend. Expectations for liquidity in the CRE debt capital markets were relatively balanced, with 14% predicting improvement, while 45% anticipated a contraction.
Additionally, the survey touched on the Federal Reserve’s monetary policy and credit standards for CRE loans. Respondents believed the Fed’s terminal target rate would remain unchanged, and 57% anticipated further tightening of credit standards for CRE loans.
“The survey’s findings underscore the balance between improving sentiment and lingering concerns within the sector,” said CREFC executive director Lisa Pendergast. “As we continue to navigate economic uncertainties and evolving policy landscapes, the industry must remain resilient and adaptable to ensure long-term growth and stability. CREFC will continue to be a resource and advocate for the industry and its members during these uncertain market conditions.”
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