The CRE survey for the second quarter shows that the office sector is performing the worst

TORONTO – The Q2 2024 CRE Industry Conditions and Sentiment Survey, a quarterly survey gathering information on current market conditions and future expectations, was recently released by Altus Group Limited.

The latest study is based on the opinions of 560 experienced CRE professionals representing more than 97 companies in the U.S. and Canada from March to April.

The survey explores participants’ views on a range of topics, including:

• Expectations for the operating environment:Most respondents describe the short-term operating environment as “somewhat challenging,” reflecting slight improvement compared to the previous quarter. While no short-term recession is expected, the next expected economic crisis is expected to be shallow and short-lived.
• Current areas of interest: Over the next six months, the main focus will remain on managing existing portfolios and exposures. Respondents expect interest rates, capitalization rates, revenues and net operating income to remain stable.
• Transaction intentions for the next six months: The majority of respondents (80% in the U.S. and 65% in Canada) intend to make a transaction in the next six months, indicating plans to buy, sell, or both. Dealing appetite this quarter is driven more by larger companies with more than $5 billion in CRE real estate exposure.
• Property performance expectations: For the fourth consecutive quarter, industrial and multifamily asset classes are expected to be the best performers over the next 12 months, with retail also expected to be as attractive as multifamily assets among U.S. respondents. The office sector is expected to have the worst performance.
• Capital availability: Expectations regarding the availability of debt capital among U.S. respondents improved significantly across all sources (excluding banks) compared with the previous quarter. Canadian respondents expect capital availability to remain weak over the next 12 months.
• Priority issues: Cost of capital remains a top priority for the fourth quarter in a row, followed by concerns about insurance costs in the U.S. and construction costs in Canada.

“CRE expectations appear to be stabilizing, despite several near-term challenges,” Omar Eltorai, chief research officer at Altus Group, said in a statement. “As CRE values ​​continue to align with what survey participants perceive as ‘fair pricing’ and transaction appetite remains high, it appears that we may be nearing the bottom of the recent market downturn.”