SURVEY: Neutral Is The New Normal For CRE Investors

Top leaders in commercial real estate finance aren’t exactly sanguine about the year ahead, but they are at least feeling less pessimistic, a new CRE Finance Council survey found. 

Overall market sentiment nudged slightly higher in the CREFC’s second-quarter board of governors survey, holding just above the 2017 baseline following a steep decline in the first quarter after investors’ outlook soured on the year ahead. 

Investors at the end of the second quarter were eyeing interest rate volatility and the prospect of a higher-for-longer rate environment and coalescing around the belief that today’s market conditions will stick around for the next year. Just 8% of respondents have a negative sentiment looking ahead at the next year, while 24% felt positive and 68% were neutral. 

It’s the highest neutral rating for a quarter since at least 2022, and a notable recovery from the 22% of first-quarter respondents who had a negative economic outlook. Neutral was the most common sentiment chosen across seven of the nine questions CREFC asked to track market conditions and outlooks.

A majority, 58%, of respondents expect the U.S. economy to perform the same over the next year as it did over the past 12 months, up from 34% the prior quarter due in part to a significant decline from the 54% of respondents who expected a worse year ahead at the end of the first quarter. 

Capital markets activity has wobbled in 2026 amid shifting tariff policies and the U.S. war with Iran. First-quarter transaction volumes totaled $113B in the U.S., up 25% year-over-year, according to JLL. 

But sales volume dried up in April, with the $25B in sales down 33% from the prior year in what JPMorgan Chase analysts called an underwhelming start to the second quarter as interest rate pressures came into focus.

By May, transaction volume had somewhat recovered and reached $42B, up 15% from the prior year, according to MSCI. But the total was boosted by $6.8B worth of M&A activity, with single-asset deal flow down 4%. 

“The refinancing ‘curtain’ has finally stopped moving back, and activity is strong; borrowers have accepted that rates will remain roughly in the zip code we are in today,” one survey respondent said in a quote from the report. 

Investors aren’t particularly confident that the federal government will make their lives easier in the year ahead, with 47% having a neutral outlook on upcoming legislative or regulatory actions and an even split between those with either a positive or negative prospect. 

They’re also relatively positive on the near-term impacts to real estate markets caused by the adoption of artificial intelligence. Half of respondents expect AI’s net effect to be modest and concentrated on select sectors, while 13% expect a significant reduction of office space demand from AI and 8% expect the tech to have a net-positive result on demand for space in the coming year. 

A majority of investors have a negative outlook on mortgage and cap rates, with just 11% expecting them to have a positive impact on the performance of all CRE finance-related businesses in the next year. Still, 52% expect CRE fundamentals will remain the same, while 37% expect them to improve and just 11% predict a decline, the lowest negative reading since at least the middle of 2024.

The split reflects more confidence in property fundamentals like occupancy, rents and net operating income than the relatively negative view of financial markets that first appeared in the first quarter and has held strong through the year. 

Transaction activity is expected to remain roughly the same, and the 42% of investors who expect more demand is down from 61% the prior quarter and the third consecutive quarterly decline. 

Expectations for borrower demand cooled the most out of all of CREFC’s questions, with a 26-percentage-point drop quarter-over-quarter in positive sentiment. Among respondents, 45% now expect more demand in the debt space, down from 71% in March and 97% at the end of the year. 

Expectations for liquidity remained steady to slightly more positive quarter-over-quarter, and investors continue to have relative faith in spreads for CMBS loans and other debt vehicles. Just 5% of respondents expect liquidity to worsen over the next year, while 13% have a negative outlook on collateralized debt markets.