Q4 Sentiment Index Dips to 57 Despite Robust Market Fundamentals
Commercial real estate executives forecast that asset values and capital availability will stabilize over the next year, leading to more measured market conditions, according to The Real Estate Roundtable's latest quarterly "Sentiment Index" released today.
"Responses to our Q4 2015 Sentiment Survey show that commercial real estate fundamentals continue to be strong, driven by robust demand across most major markets and asset classes. Concerns with appreciation in CRE asset values over the next year center on the timing and pace of interest rate changes, and international volatility. However, some survey respondents also note that international volatility might create more demand for safe haven assets like US CRE, thus continuing to push values forward and a slow, measured rate increase could be very positive longer term for the US economy," said Roundtable CEO and President Jeffrey D. DeBoer."
The Roundtable's Overall Sentiment Index score for the fourth quarter is 57 – a four point dip from the previous quarter, but a 13 point drop from the same time one year ago. [The Overall Index is scored on a scale of 1 to 100 by averaging Current and Future Indices; any score over 50 is viewed as positive.] This quarter's Current Index of 62 dipped four points from the previous quarter, yet dropped 12 points compared to Q4 2014 score of 74. This quarter's Future Index of 52 also decreased four points from the previous quarter, but dropped 13 points compared to the same time one year ago, when it registered at 65.
In addition to CRE asset values, the Sentiment Index continues to report positive conditions about debt and equity capital markets, with a prudent view. Several respondents noted that Real Estate Investment Trusts (REITs) have been sidelined from equity markets over recent quarters, even though capital remains plentiful on the private side.
DeBoer added, "The recent Congressional action on the national debt ceiling and federal budget occurred after this survey and should help to remove some associated uncertainties from the economy and markets. Even so, lawmakers in Washington must take additional steps to implement policies that bolster job creation and propel forward the slow but ongoing economic recovery. For example, Congress should act now to reform and reauthorize the job-creating EB-5 'immigrant investor' program, currently scheduled to expire on December 11."
Data for the Q4 survey was gathered in October by Chicago-based FPL Associates on The Roundtable's behalf.