CRE Market Sentiment Improves But Remains Low

Chart courtesy of RCLCO

CRE executives’ market sentiment has improved compared to mid-2020, but remains well below year-ago figures, reported RCLCO Real Estate Advisors, Washington, D.C.

The semi-annual RCLCO National Market Sentiment Survey plunged from a “very good” 65 at year-end 2019 to a “dismal” 9.2 at mid-year 2020 in the wake of pandemic-related shutdowns. The index increased 22.4 points over the past six months to 31.2 at year-end 2020, a significant improvement but well below the optimism seen one year ago. An index reading below 30 indicates economic stress or recession.

“The mid-year 2020 results highlighted the speed and intensity of the economic downturn sparked by COVID-19 with a significantly more pessimistic outlook than usual,” the report said. “The year-end 2020 result is still much lower than previous years but demonstrates an increasingly optimistic outlook as the economy and real estate markets enter a new year and head toward recovery.” 

More than six in 10 survey respondents said they anticipate real estate conditions will be moderately or significantly better in the next 12 months than they are today. The index could climb to 68 over the next 12 months, RCLCO said.

The survey found no clear consensus on the likely impact a Biden administration will have on real estate market conditions. Just more than 25 percent of respondents indicated they expect it will have a negative impact, 30 percent said they expect a positive impact and 39 percent remain neutral on the subject.

Nearly 90 percent of respondents said they believe the teleworking trend will endure past the pandemic, which will affect the decisions of both households and office landlords. Respondents indicated some product types have moved from contractionary phases into expansionary phases in the real estate cycle since the mid-year 2020 survey. But retail, office and hospitality have all hit the bottom of the cycle and are expected to remain there over the next 12 months.