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The NAIOP CRE Sentiment Index fell to a five-year low in mid-March nationally, indicating that developers, landlords and other industry professionals believe the outlook for the commercial real estate industry has dimmed amid the coronavirus.
The bi-annual survey of more than 400 corporate respondents found that the overall sentiment dropped to 45, from 57 when it was last conducted, in September. The result was the lowest since the index was created in 2016 and the first time the sentiment has dipped below 50.
Any result lower than 50 means that “unfavorable conditions” for the industry are likely to swirl for the next 12 months, according to the nation’s leading trade association for developers, property owners, investors and service providers. By way of explanation, if every participant selected the most optimistic answer on the survey’s questions, the sentiment index would be 100.
NAIOP officials caution, however, that the March 11 to March 25 survey came as the U.S. was increasingly battling the novel coronavirus and coming to terms with the impacts of the COVID-19 pandemic on business and the economy, and may not represent a true indicator of future sentiment.
The prospects for the industry’s future in the Tampa Bay area, where NAIOP maintains a chapter, however, remain more robust.
Clayton Bricklemyer, a land-use attorney with the Bricklemyer Law Group in Tampa and NAIOP’s 2020 Tampa Bay chapter president, says he expects the Gulf Coast to weather the COVID-19 storm better than many parts of the U.S.
“The development folks I’ve spoken to since the pandemic took hold still feel pretty good about things overall,” Bricklemyer says. “The sense is there may be some correction that takes place but, for the most part, there remains a lot of optimism on deals.
“I attribute that to the fact that we in the Tampa Bay area have a lot more going for us than in many parts of the country. Tampa has a diversity of jobs, and long-range developments are ongoing,” Bricklemyer adds. “Jeff Vinik, for instance, is pressing on with Water Street Tampa, and other developments are proceeding. I believe from the calls I’ve been on that optimism will come back a lot faster here than elsewhere.”
He also expects that in-migration to Florida from Northeast states, in particular, will accelerate in the wake of the coronavirus pandemic, fueling an already healthy pipeline for both residential and commercial real estate projects.
In the national NAIOP survey, prospects for employment growth fell to 51 in March, from 74 last September. The sentiment regarding future equity and debt availability also declined “sharply,” NAIOP says.
Of the total, half of the respondents work in the industrial real estate sector, 21% in the office sector, one-quarter in the multifamily sector and 5% in retail. In all, the survey is provided to more than 10,000 NAIOP members nationwide.
The trade group plans to re-administer the survey in September.
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