Real estate financiers in the United States are expressing somewhat less confidence in the country’s economy as summer takes holds. The recent quarterly survey of the CRE Finance Council’s board of governors finds more than one third of respondents foresee slipping economic outcomes over the next 12 months. Just 14 per cent indicated that expectation at the end of the first quarter this year.
However, there’s general consensus that conditions for commercial and multifamily real estate finance are relatively stable, with 61 per cent of respondents pegging their overall outlook as neutral over the next 12 months. The association represents lenders, loan and bond investors, private equity firms, debt servicers and rating agencies engaged in the USD $6 trillion commercial and multifamily real estate finance industry, and the quarterly sentiment index weighs its leading executives’ perception of nine standard metrics and some additional special topics.
“The 2Q 2024 survey results reflect an industry forging its way through significant uncertainty,” observes Lisa Pendergast, executive director of the CRE Finance Council. “As the industry navigates these challenging waters, its resilience and ability to innovate will be key to capitalizing on emerging opportunities while mitigating potential risks.”
Results gathered between June 26 and July 11, 2024 show little quarter-over-quarter change in how respondents view real estate fundamentals. The same minority share (24 per cent) are optimistic that occupancy rates, rent and net operating income will improve over the next 12 months, but a slightly lower quotient (30 per cent versus 33 per cent at the end of Q1) expect a decline. As well, 41 per cent foresee a positive shift in interest and cap rates compared to just 31 per cent in Q1.
Most also see strong investor demand for assets coupled with borrower demand for financing. Only 2 per cent of respondents predict a drop in demand for financing over the next 12 months, but 17 per cent expect worsening liquidity in the same period. There is also slipping confidence in the commercial mortgage-backed securities (CMBS) market, with 15 per cent of respondents expecting it will negatively affect the performance of CRE finance-related businesses over the next 12 months. That’s up from 8 per cent in the Q1 survey.
