While one report should never be seen as indicative of a trend in and of itself, good news is always welcome.
The latest NAIOP index of commercial real estate sentiment, which measures developers’ and building owners’ expectations for conditions for the next 12 months, has risen above the 50 threshold for the first time in 18 months.
The latest index only reached 52, but respondents said they are more optimistic than they had been about every CRE segment except construction costs.
Developers expect to see interest rates decline in the next 12 months, pushing the expected availability of debt and equity up to 58 on the index. Developers and owners also expect greater deal volume.
The survey also looks at what types of projects are likely targets over the coming year. By percentage, developers and owners are looking at:
- Industrial: 40.6%;
- Multifamily: 24%;
- Data Centers: 7%;
- Retail: 6%;
- Office: 5.5%;
- Mixed-use: 4.8%;
- Medical Office: 4.2%;
- Life Science: 3.1%;
- Self-storage: 1.3%, and
- Hospitality: 0.7%
Costs for labor and construction materials continued to lag below the 50 midpoint.
While general local economic conditions rated a 54, respondents were generally negative about regulatory issues, including local approval processes, particularly for housing-related developments, and general governmental regulatory increases. (Source)