NEW
YORK, July 22, 2024 /PRNewswire/ -- The CRE
Finance Council (CREFC), the industry association representing the
nearly $6 trillion commercial and
multifamily real estate finance industry, today released the
results of its Second-Quarter 2024 (2Q 2024) Board of Governors
(BOG) Sentiment Index survey. Conducted between June 26, 2024, and July
11, 2024, this survey has provided critical insights into
the sector since its inception in the fourth quarter of 2017.
The 2Q 2024 Index decreased to 102.4, a 3% decline from the
previous quarter's 105.4. This change reflects growing caution in
the economic outlook and the ongoing impacts of higher interest
rates.
Key Highlights from the 2Q 2024 Core Questions:
The survey's core questions revealed significant changes in
expectations and insights:
- Economic Outlook: Confidence in the U.S. economy has
waned, with only 11% of respondents expecting better performance
over the next 12 months, down from 24% in the previous
quarter.
- Federal Policy Impact: Neutral sentiment toward federal
legislative and regulatory actions increased to 67%, while negative
sentiment decreased to 26%.
- Mortgage and Cap Rates: An optimistic shift, with 41% of
respondents viewing the impact of rates positively, compared to 31%
in the prior quarter.
- CRE Fundamentals: Stability is expected, with 24%
anticipating improvement, consistent with the previous
quarter.
- Transaction Activity: Demand is expected to remain
strong, with 54% expecting increased investor demand, consistent
with the prior quarter (55%).
- Financing Demand: While still robust, expectations for
borrower demand slightly decreased to 65% from 69%.
- Liquidity: Expectations for improved liquidity fell to
46%, compared to 57% in the prior quarter.
- CMBS Market: Positive sentiment toward CMBS and
CRE CLO demand decreased to 43% from
51%.
- Overall Sentiment: Industry sentiment has moderated with
61% neutral and only 22% positive, down from 35% in the prior
quarter.
Observations from Additional Topical Questions:
The additional questions in the 2Q 2024 Sentiment Index provided
deeper insights into critical areas affecting the industry,
particularly in response to macroeconomic changes and
industry-specific challenges.
The survey results indicate a varied response to the sharp
increase in CMBS issuance, primarily driven by single-asset
single-borrower (SASB) CMBS transactions. While 37% of respondents
anticipate continued growth in SASB issuance, reflecting sustained
market confidence, a larger segment of 48% expects a stabilization
in SASB issuance volume, with a predicted shift toward more
traditional conduit transactions.
Regarding the upcoming presidential election, a significant
majority (61%) of the respondents believe a victory by former
President Trump would be more beneficial for CRE finance. The
survey reveals a stark contrast in sentiment, with only 11%
favoring a Biden victory and a notable portion (20%) viewing the
outcomes of the election as equally positive or negative.
High interest rates and valuation uncertainties continue to
strain lending markets, particularly impacting maturing loans
across balance sheet and CMBS portfolios. Climate risk and
insurance challenges are emerging as significant concerns, which
are expected to gain prominence in the coming year. Additionally,
the implications of recent legal decisions, such as the Chevron
case, and potential changes in lending programs and underwriting
criteria for Fannie Mae and Freddie Mac are being closely monitored
for their potential impacts on the industry.
Lisa Pendergast, Executive
Director of CREFC, remarked, "The 2Q 2024 survey results reflect an
industry forging its way through significant uncertainty. As the
industry navigates these challenging waters, its resilience and
ability to innovate will be key to capitalizing on emerging
opportunities while mitigating potential risks."
For further details on the CREFC 2Q 2024 BOG Sentiment Index and
the full report, please click here.
About CREFC's Board of Governors Sentiment Index
The CRE Finance Council (CREFC) is the trade association for the
commercial real estate finance industry. Approximately 400
companies and 19,000 individuals are members of CREFC. CREFC's
members serve a critical role in the US economy by financing office
buildings, industrial and warehouse properties, multifamily
housing, retail facilities, hotels, and other types of commercial
and multifamily real estate.
Over 50 senior executives in the commercial real estate finance
markets represent CREFC's Board of Governors and hail from every
sector of the commercial real estate lending and mortgage-related
debt investing markets. CREFC Governors include balance sheet and
securitized lenders, loan and bond investors, mortgage bankers,
private equity firms, loan servicers, rating agencies, attorneys,
accountants, and others. CREFC's Governors serve up to six years on
CREFC's Board and are all senior members in their firms and the
industry.
CREFC's BOG Sentiment Index aims to gauge quarter-to-quarter
shifts in market conditions for the CRE finance market and the
outlook for the future. The survey consists of nine core questions
and additional topical questions (not factored into the BOG Index)
and was first administered in 2017. The Sentiment Index equally
weighs the responses to each question and then sums those weighted
responses to create a single index.
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SOURCE CRE Finance Council