NAIOP Study: One-Year Market Outlook Bolstered by Self-confidence in Employment, Occupancy Rates

Potential customers for the CRE market continuing at a more robust rate are higher than exactly what was anticipated 6 months back, inning accordance with the most recent NAIOP Sentiment Index performed earlier this spring.

While the results, which reversed a consistent two-year down trend in market sentiment, were tape-recorded before the current stock depression this month, at the time study respondents thought that overall market conditions 12 months from now (in March 2018) would continue to be favorable for the commercial property industry, and they expected conditions would be better than they are today, according to NAIOP.

NAIOP stated its belief index is 0.9% greater than the previous survey it performed in September 2016, although it has actually decreased 5.4% on an absolute basis given that the very first survey was carried out in February 2015.

The two largest favorable changes in the study that assisted improve the outlook into positive area were much greater confidence in work and in occupancy rates.

Survey ratings for adding workers (a 5% boost) and tenancy rates for new tasks (a 5.3% boost) were both a significant trend reversal for these 2 categories from the prior three studies.

The NAIOP survey also recognizes where respondents reveal issue: the costs of construction materials and labor and first-year cap rates.

Expectations for both products and labor costs was up to bigger negatives (reductions of about 3%) and optimism for first-year cap rates fell by 4.5%.

The Sentiment Index is developed to forecast basic conditions in the industrial realty market over the next 12 months. The forecast is not based upon an analysis of historic information, however rather a look into the future by commercial property designers, owners and financiers asked to respond to the same set of concerns each time.

The information is assembled and evaluated by Tom Hamilton, Ph.D., MAI, CRE, and Gerald Fogelson Distinguished Chair in Property at Roosevelt University in Chicago.Direct Remarks

from the Study Individuals NAIOP provided some of the more important remarks from participants but without attribution.” I am comfortable with a strong market over the next 12 months; nevertheless I believe we will be dealing with a lot more tough economy 12-24 months from now. The marketplace exuberance about [President] Trump will fade, interest rates [will] begin to rise, the implications of overbuilding multifamily product will kick in, and the cyclical economy will begin a down turn.”” As long as the equity and capital markets stay as strong as they are, I think any slump we experience in the markets will have the ability to be balanced out and controlled. “” I see an extraordinary degree of uncertainty about [the] cost of
loan( interest and cap rates), market fundamentals (supply and need), unforeseeable economic changes in the age of [President] Trump, and tax reform if it gets traction( loss of historical, brand-new markets, and low-income housing tax credits; carried interest; brand-new taxes to balance out brand-new costs; and so on). Take advantage of promised deregulation may be neutralized by dysfunctional government handled by unaccountable appointees. We may have a series of re-starts in Washington. “

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