CREFC's 4Q 2023 Board of Governors Sentiment Index Reveals Optimism for 2024

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Jan 18, 2024, 10:00 ET

NEW YORK, Jan. 18, 2024 /PRNewswire/ -- The CRE Finance Council (CREFC), the industry association that exclusively represents the $5.9 trillion commercial and multifamily real estate finance industry, announced the results of its Fourth-Quarter 2023 (4Q 2023) Board of Governors (BOG) Sentiment Index survey. Administered between December 18, 2023, and January 3, 2024, the survey serves as a reliable barometer of market conditions and outlook as perceived by senior members of the industry.

CREFC Board of Governors Sentiment Index

The 4Q 2023 Index, representing responses from 95% of the BOG, marked a significant upturn, registering at 109.9 - a 33% increase from the previous quarter's 82.7.

This leap is the largest quarterly increase since the survey's inception, indicating a notable shift in industry sentiment.

Key Highlights from the 4Q 2023 Core Questions

Economic Optimism: A sharp increase in a positive outlook for the U.S. economy over the next 12 months was observed, with 54% of respondents expecting better performance compared to just 7% in the previous quarter.
Policy and Rates Impact: Views on the impact of federal government actions and mortgage/cap rates on CRE finance-related businesses showed a tilt toward more positive or neutral perceptions.
CRE Fundamentals and Transaction Activity: There was marked improvement in expectations for CRE fundamentals and investor demand for CRE/multifamily assets.
Financing and Liquidity: A substantial rise in anticipated borrower demand for financing and liquidity in the CRE debt capital markets was noted.
CMBS and CRE CLO Markets: A significant increase in positive sentiment toward CMBS and CRE CLO demand/spreads.
Industry Sentiment: Whereas 58% of the BOG held a negative overall sentiment for all CRE finance businesses over the next 12 months in the prior quarter, only 19% felt the same in this most recent survey.

Observations from Additional Topical Questions:

While the survey's core questions painted a broadly positive picture, the additional open-ended responses highlighted some concerns. These included apprehensions about rate cuts amidst a slowing economy, multifamily sector challenges, and uncertainties in financing and liquidity. Concerns were also noted about the potential for increased inflation, slower GDP growth, and sector-specific issues such as multifamily oversupply and office sector stagnation.

"The significant rise in the Sentiment Index underscores a cautiously optimistic outlook in the CRE finance industry, said Lisa Pendergast, Executive Director, CREFC. "While we are navigating through a landscape of economic uncertainties and sector-specific challenges, the overall sentiment reflects confidence in the resilience and adaptability of the market. It's a testament to the industry's robustness in the face of evolving macroeconomic conditions."

Please click here for more details on the 4Q 2023 BOG Sentiment Index and its findings.

About CREFC's Board of Governors Sentiment Index

The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. More than 400 companies and over 18,000 individuals are members of CREFC. CREFC's members serve a critical role in the U.S. economy by financing office buildings, industrial and warehouse properties, multifamily housing, retail facilities, hotels, and other types of commercial and multifamily real estate.

Nearly 60 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 as well as 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.

SOURCE CRE Finance Council