National Housing Market Outlook

Investors Hit Pause, per Burns + CRE Daily Fear and Greed Index

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Alex Thomas

February 27, 2024
Hong Kong Central District Skyscrapers

Commercial real estate investors unsurprisingly rank Office real estate lowest and Industrial real estate highest on our new sentiment-driven index.

We have expanded our Fear and Greed Survey to include the Burns + CRE Daily Fear and Greed Index. Produced in collaboration with CRE Daily, the index captures sentiment across the commercial real estate market, including the Multifamily, Industrial, Retail, and Office sectors. Download your FREE copy of the 4Q23 survey findings now.

Our proprietary survey drives the Fear and Greed Index, gauging how much commercial real estate (CRE) investors:

  • Are currently increasing or decreasing their exposure to CRE
  • Expect to increase or decrease their exposure to CRE over the next six months
  • Are able to access capital for CRE investments  

The Fear and Greed Index debuts at 51 out of 100, with the individual CRE sectors varying between index values of 39 and 57.

Note: The Fear and Greed Index uses a scale of 0 to 100, where a value below 45 indicates a contracting market, and a value above 55 indicates an expanding market. Values between 45 and 55 indicate a balanced market.

Here’s what we learned from over 900 market ratings from CRE investors this quarter:

Even more CRE investors are in wait-and-see mode than last quarter.

The majority (66%) of CRE investors told us they are holding their current investment exposure, well above the share who said they are increasing (21%) or decreasing (13%) their CRE exposure. This is also a considerable jump from the 49% we reported as holding last quarter.

More investors expect to increase rather than decrease their CRE exposure over the next six months in every sector except Office.

The Federal Reserve’s dovish turn over the last several weeks and its hints of rate cuts in 2024 are spurring CRE investor optimism.

  • “If interest rate cuts happen with any speed, there’s again going to be a wave of money waiting to deploy into assets.” – Multifamily CRE investor

Investors expect Retail and Industrial values to grow, on average, by year-end 2024. However, investors expect Multifamily and Office asset values to fall further.

Investors across CRE asset classes note that access to capital for CRE became more difficult between 3Q23 and 4Q23, which helped drive down asset values year over year.

  • “Valuations will be contingent on interest rate movements [in 2024]. Multifamily fundamentals will deteriorate because of excess supply, slower job growth, and insurance cost increases as policies renew. Industrial fundamentals will improve as supply is absorbed and will hold up much better.” – Multifamily and Industrial CRE investor
  • “While 2023 was a slower year, I think the primary reason for the decline in value and transaction volume was due to the increase in interest rates. Assuming there are no black swan events in 2024, we are confident that things will start to pick back up, especially if the Fed decreases rates slowly.” – Multifamily CRE investor

Large, centrally located office properties will likely continue to struggle in 2024.

  • “Office occupancies in multi-tenant buildings will continue to be low, and demand/values may wane more from here.” – Office CRE investor

It’s all about the rates.

If the Fed does end up cutting rates this year (as is our base case), expect some upside for CRE values in sectors that have been depressed by a lack of capital. However, be aware of headwinds to fundamentals for certain property types in 2024, such as office buildings in central business districts and multifamily buildings in markets with significant construction.

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 product markets. We will continue to track shifts in sentiment across commercial real estate and keep you informed.

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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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