Fear Or Greed? The Bottom Is In, Say Commercial Real Estate Investors

A survey of commercial real estate investors on their current market sentiment is another sign that the sector is moving in the right direction. The Burns + CRE Daily Fear and Greed Index, conducted by CRE Daily and John Burns Real Estate Consulting, surveyed approximately 1,000 investors. Many believe the current real estate cycle has reached its bottom. The survey was done before the Fed dropped interest rates. 

Overall, the study found that 38% feel we have already hit the bottom of the cycle, while another 18% think it will happen before the end of 2024. The Fear and Greed Index is on a scale of one to 100. Anything below 50 indicates fear in the marketplace. The most recent sentiment indicator came in at 53, balancing fear and greed. When the number ticks up above 55, it's a sign investors are ready to pounce. 

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Commercial real estate investors aren’t quite ready to change their exposure yet; 68% plan to stay where they are for now. Across all sectors, 46% of investors expect to increase their commercial real estate exposure over the next six months. 

One issue for investors is finding access to capital, although the situation may be improving. While 37% reported that accessing capital is still more challenging, 8% said it is getting easier. We anticipate that this may improve in the coming months. 

Investors believe values have fallen across every sector, but the amount of the decline tells part of the story of sector-specific real estate investing. In the third quarter of last year, investors said that multifamily prices were down by 17%, and now they show only a 6% drop. 

An improvement was also seen in retail, where the estimate of price decline went from down 10% to down only 2%. Industrial real estate prices showed a fairly flat sentiment, although they fell to down 3% during the survey period. 

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Office real estate remains the biggest concern for most investors, with prices down 20% yearly. However, investors are hesitant to say the worst is over in this sector; 37% say values have hit bottom, while 43% expect more declines in 2025. The sector itself remains a study in contrasts. 

The flight to quality that has driven the market over the last several years is still in play. Class A office space remains strong, but Class B offices, especially those older than 15 years, haven’t found their bottom. One investor surveyed said, “Office is still having its e-commerce moment like retail did in the Great Financial Crisis." 

Although multifamily has struggled recently with oversupply and some rent decreases, the survey showed that investors anticipate more growth in the sector, driven partly by interest rate changes. Investors are diving in; 57% want to increase their exposure in the coming months and only 7% are headed in the opposite direction. 

A big issue on investors’ minds is insurance costs. Around 75% of those surveyed said they’d seen a 10% or greater increase in insurance premiums. This may change where some investors allocate capital, steering clear of higher-risk markets like California and Florida. "Hazard/casualty insurance for multifamily has become an outsized line item," said one survey respondent. 

Overall, the opportunities seem to be everywhere and investors are gearing up. One investor summarized the situation: "Now is the time to buy if you can secure capital. Values will be on the rise as interest rates decline. Buy now and plan to refinance within three years."

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