National Housing Market Outlook

CRE Investors Are Cautiously Optimistic For Now, except Office Investors

Alex Thomas photo

Alex Thomas

November 17, 2023
Hong Kong Central District Skyscrapers

We are proud to announce the Burns + CRE Daily Fear and Greed Survey, a collaboration with our partners at CRE Daily. The survey captures sentiment among actors across commercial real estate, including the multifamily, industrial, retail, and office sectors.

Here’s what we learned from 700+ market ratings from commercial real estate investors this quarter.  

1. Commercial real estate investors are still more “Greedy” than “Fearful,” though many investors have hit pause.  

  • 28% of commercial investors are increasing their investment exposure now as compared to 23% decreasing their investment exposure (net 5% of investors are still “greedy”).  
  • Nearly half (49%) of investors told us that holding and leaving their CRE exposure unchanged is the right course of action right now, particularly given financing challenges and market volatility. 

2. Office investors are the most fearful right now.  

  • Office investors are overwhelmingly pessimistic in today’s environment, with a net 40% of office investors decreasing their investment exposure. Remote/hybrid work arrangements, slower hiring (or outright layoffs) in rate-sensitive sectors, and higher interest rates have all impacted office occupancy and valuations over the last year.   

3. Asset values have declined year over year across all asset types.  

  • Our survey is a leading indicator of changes in asset values since we ask investors how much they believe sector-wide asset values have changed (rather than their actuals). This is particularly important in an environment like today’s, where a lack of transactions due to the wide bid-ask spread between buyers and sellers is muddying valuations.  
  • “Low transaction volume has obscured the extent to which values have fallen, but owners cannot avoid the realities of the market in perpetuity. Over the next 12 to 24 months, values will fall more abruptly than they have since the Fed began tightening monetary policy.” – Texas investor

The bottom line

Given higher-for-longer interest rates, there is likely more downside risk in the commercial real estate market than upside for the time being. Expect distressed opportunities to become apparent into 2024 and 2025, particularly in office and oversupplied multifamily markets, as the market adjusts to increasing capital costs.

Our Research team provides clients with timely insight into where the market is headed, guided by our housing and economic forecasts for the for-sale, for-rent, and building products markets. We will continue to track shifts in sentiment across commercial real estate going forward.

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About The Author

Alex Thomas photo
Alex Thomas
Senior Research Analyst, Macro
Alex assists our research team in tracking macro-level economic and housing trends and data. He also helps cover the fix-and-flip space.

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