CRE Sentiments Dip Slightly

Commercial real estate executives’ sentiments dipped slightly compared to six months ago, reported RCLCO, Los Angeles.

Slightly more than half the CRE executives RCLCO surveyed said real estate market conditions are “moderately or significantly better” today than 12 months ago–a four percentage-point drop compared to six months ago, RCLCO’s Real Estate Market Index found.

The index, which measures sentiment on a 100-point scale, declined to 68.0–a 2.8 percentage point drop from six months ago. “This decline was anticipated by respondents in the last survey, who correctly predicted the current RMI within half a point,” RCLCO Managing Director Len Bogorad and Senior Associate Mark Simpson said in a sentiment survey special report. “The current projections for future sentiment also align with the projections from six months ago, with both survey results indicating that the RMI is expected to decline to the low-60s within the next six to 12 months.”

Bogorad and Simpson noted sentiment has generally trended downward since mid-2015. “Current sentiment is somewhat lower today than it was six months ago, and respondents predict sentiment will be lower this time next year,” the report said. “In other words, the real estate markets continue to experience the characteristics of the mature phase of the current real estate cycle.”

RCLCO said the year-end 2016 survey found a “Trump Bump” in optimism among CRE executives, driven by the anticipated effect a newly elected president and a Republican congress could have on real estate markets. “Respondents were generally optimistic about the benefits that the promised pro-business policies would have,” Bogorad and Simpson said, noting that 59 percent said that the new administration would have a positive affect on U.S. real estate markets. “This positive outlook stood in stark contrast to the 17 percent who anticipated that then President-elect Trump would have a negative impact, worrying about his unpredictability and lack of detail around his policy proposals.”

But the new administration’s lack of major legislative accomplishments thus far left respondents feeling much less optimistic about President Trump’s ability to positively affect U.S. real estate markets, Bogorad and Simpson said. Just over one-third of respondents said they see Trump having a “somewhat or very positive impact” over the next 12 months, down 23 percentage points from six months ago. “This drop in optimism is also reflected in the uptick in the percentage of respondents expecting Trump to have a negative impact on real estate markets,” the report said. More than 25 percent of survey respondents now anticipate a negative impact compared with 18 percent of respondents in December.