CRE Finance Council Index Reveals Optimism for 2024

NEW YORK– The CRE Finance Council (CREFC), the industry association that exclusively represents the $5.9 trillion commercial and multifamily real estate finance industry, announced the results of its Fourth-Quarter 2023 (4Q 2023) Board of Governors (BOG) Sentiment Index survey. Administered between December 18, 2023, and January 3, 2024, the survey serves as a reliable barometer of market conditions and outlook as perceived by senior members of the industry.

The 4Q 2023 Index, representing responses from 95% of the BOG, marked a significant upturn, registering at 109.9 – a 33% increase from the previous quarter’s 82.7.

This leap is the largest quarterly increase since the survey’s inception, indicating a notable shift in industry sentiment.

Key Highlights from the 4Q 2023 Core Questions:

  • Economic Optimism: A sharp increase in a positive outlook for the U.S. economy over the next 12 months was observed, with 54% of respondents expecting better performance compared to just 7% in the previous quarter.
  • Policy and Rates Impact: Views on the impact of federal government actions and mortgage/cap rates on CRE finance-related businesses showed a tilt toward more positive or neutral perceptions.
  • CRE Fundamentals and Transaction Activity: There was marked improvement in expectations for CRE fundamentals and investor demand for CRE/multifamily assets.
  • Financing and Liquidity: A substantial rise in anticipated borrower demand for financing and liquidity in the CRE debt capital markets was noted.
  • CMBS and CRE CLO Markets: A significant increase in positive sentiment toward CMBS and CRE CLO demand/spreads.
  • Industry Sentiment: Whereas 58% of the BOG held a negative overall sentiment for all CRE finance businesses over the next 12 months in the prior quarter, only 19% felt the same in this most recent survey.

Observations from Additional Topical Questions:

While the survey’s core questions painted a broadly positive picture, the additional open-ended responses highlighted some concerns. These included apprehensions about rate cuts amidst a slowing economy, multifamily sector challenges, and uncertainties in financing and liquidity. Concerns were also noted about the potential for increased inflation, slower GDP growth, and sector-specific issues such as multifamily oversupply and office sector stagnation.

“The significant rise in the Sentiment Index underscores a cautiously optimistic outlook in the CRE finance industry, said Lisa Pendergast, Executive Director, CREFC. “While we are navigating through a landscape of economic uncertainties and sector-specific challenges, the overall sentiment reflects confidence in the resilience and adaptability of the market. It’s a testament to the industry’s robustness in the face of evolving macroeconomic conditions.”