Altus Group Survey: Increase in Prioritizing ‘Deploying Capital’ in Near Term

(Image courtesy of Altus Group; Breakout image courtesy of Pixabay/

Altus Group, Toronto, released its Commercial Real Estate Industry Conditions and Sentiment Survey for Q1, finding U.S. respondents who expect their primary focus to be deploying capital in the next 6 months grew from 7% at the end of 2023 to 25% in the most recent quarter.

Moreover, the percentage of respondents who are primarily focused on managing their existing portfolios fell from 57% in Q4 to 42% in Q1.

Sentiments related to pricing improved somewhat–while 41% of survey participants still characterize current pricing across all property types as “overpriced,” that’s a 21-percentage-point decline compared with the past quarter.

The reported cost of debt financing improved across different loan terms, rate types and collateral property types, with the average all-in debt financing dropping by about 70-90 basis points across 5- and 10-year debt structures. Multifamily and industrial continue to have the lowest overall rates.

Recession concerns improved in the quarter–with 37% responding that a recession seems “very likely” and 29% responding “somewhat likely” in the near term, that was down from 77% overall expecting one in Q4 2023.

Looking forward over the next year, more than 90% of respondents say they expect interest rates to remain stable or decrease, a major shift from the prior quarter. The outlook was mixed on cap rate expectations.

Most respondents, or 54%, still expect revenue growth to be stable over the next year. Fifty-three percent expect NOI growth to be stable, and 36% expect it to decrease.

While 76% of respondents expect CRE distress to increase over the next year, that’s down 4 percentage points from the prior quarter. Almost two-thirds of respondents expect attractive investment opportunities and transaction activity to pick up.

By property type, survey participants expect industrial to be the best-performing property type and office to be the worst. However, retail is now topping expectations in terms of net favorability.  

Over the next year, cost of capital and credit availability top the list of priorities, followed closely by operating costs, insurance costs and leasing/tenant retention.

Altus Group’s research team conducted the survey from late January to early February, with 256 respondents representing at least 65 firms.