NEW YORK, Oct. 10, 2023 /PRNewswire/ — The CRE Finance Council (CREFC), the industry association that exclusively represents the $5.9 trillion commercial and multifamily real estate finance industry, today announced its Third Quarter 2023 (3Q 2023) results. Announced ) Board of Governors (BOG) Sentiment Index Survey. Administered between September 12 and 22, 2023, the survey serves as a reliable barometer of CRE finance market conditions and outlook as perceived by senior members of the industry.Thank you for reading this post, don't forget to subscribe!
The 3Q 2023 BOG index rose 5% to 82.7 from 78.5 last quarter, indicating a cautious increase in sentiment. The results show that although the overall sentiment towards CRE finance businesses has improved, a large proportion of 58% still maintain a negative outlook. However, this was down from 67% recorded in the previous quarter.
Highlights of 3Q 2023 Key Questions:
- economy: While expectations for the US economy over the next 12 months remain low, there has been a significant decline in respondents anticipating a worse scenario (44% in 3Q 2023 from 55% in the previous quarter).
- Policy: The sector expects an increase in negative impacts from federal legislative and regulatory actions, with 56% expecting harmful impacts in the second quarter of 2023 compared to 49%.
- Rates: Concern that mortgage and capitalization rates will negatively impact CRE finance businesses increased from 65% in 2Q 2023 to 80% in 3Q 2023.
- CRE Basics: Optimism is slowly returning, with an increase in those expecting improvement or no change in fundamentals like occupancy and rents.
- Transaction Activity: Growing optimism was found in investor demand for CRE/multifamily assets, with 33% expecting higher demand in 2Q 2023 compared to 25%.
- Financing Demand: Borrower demand for financing is expected to increase, with 53% expecting greater demand, unchanged from 2Q 2023.
- Liquidity: A notable change in expectations for growth in CRE loan liquidity was observed, moving towards a positive or neutral stance.
- CMBS Capital Markets: There was a clear increase in positive sentiment for CMBS and CRE CLO demand and improving spreads.
- Industry sentiment less negative: As mentioned earlier, the majority (58%) maintained a negative outlook, down from 67% last quarter.
Comments from additional topical questions:
- higher for a long time, The market expects rates to remain high.
- multi Family, Concerns about multifamily have increased due to rising costs, slow rent growth and increasing maturity despite low current crime rates.
- office tiering dominates, The respondents noted a significant level of improvement in the performance of properties, particularly in the office sector.
- Return to office? Many had expected a stronger return to office trend than today.
- cautiously optimistic, The responses reflect cautious anticipation of more transactions in the coming quarters amid ongoing challenges to asset values and lack of loan production.
Lisa Pendergast, Executive Director of CREFC, said, “This quarter’s BOG Sentiment Index indicates a slight increase in optimism; however, the makeup of this optimism is layered.”
“The main concerns revolve around higher rates for the longer term, regulatory overreach and anticipation of the broader economy. As we move through this period of prolonged uncertainty, CREFC will be a resource and resource for the industry and its members. Will remain a lawyer.”
For a summary of the 3Q 2023 survey results, please click here.
About CREFC’s Board of Governors Sentiment Index
The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. More than 400 companies and 18,000 individuals are members of CREFC. CREFC members play an important role in the U.S. economy by financing office buildings, industrial and warehouse properties, multifamily housing, retail facilities, hotels and other types of commercial and multifamily real estate.
Approximately 60 senior executives in the commercial real estate finance markets represent CREFC’s Board of Governors and come from every sector of the commercial real estate lending and mortgage-related loan investment markets. CREFC governors include balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, lawyers, accountants and others. CREFC Governors serve on the CREFC Board for six-year terms and are all senior members in their firms and industry.
CREFC’s BOG Sentiment Index, launched in 2017, aims to assess quarter-on-quarter changes in market conditions and the outlook for the future for the CRE finance market. The survey includes nine core questions as well as additional topical questions (not included in the BOG index). First administered in 2017, that index weighs responses to each question equally and then combines those weighted responses to create a single index.
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Source CRE Finance Council