CRE Sentiment Index: Higher Interest Rates, Cap Rates Among Areas of Concern

Originally published on October 18, 2022, by NAIOP.

The NAIOP CRE Sentiment Index for September 2022 is 47, down from April’s reading of 53. It is at its lowest level since September 2020. This reading suggests that respondents expect unfavorable conditions for commercial real estate over the next 12 months. 

Key Takeaways:

  • Respondents expect higher interest rates, higher cap rates, and a decrease in the supply of equity and debt over the next year.
  • Their outlook for occupancy rates, face rents, and effective rents are also less optimistic, though they still expect rents to grow.
  • Respondents also expect a sharp deterioration in general industry conditions over the next 12 months.
  • The only positive development in the September survey is that respondents expect a slower pace of construction cost inflation over the next year.
  • Despite a more pessimistic outlook for development conditions, developers plan to maintain recent deal volume over the coming year.
  • Most respondents expect to be most active in projects or transactions related to industrial properties over the next year.
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