More Investors Expect To Deploy Capital As Buyers, Sellers Get Closer On Pricing

Commercial real estate professionals reported less concern around industry and market fundamentals and increased willingness to invest compared to last year, according to a new survey.

According to Altus Group's latest CRE Industry Conditions & Sentiment Survey, 25% of CRE executives say their primary focus over the next six months will be deploying capital. Just 7% of surveyed executives said the same in Q4 2023.

And while price discovery continues to plague those in the market for deals, with 41% of those surveyed saying that all property types are "overpriced," fewer people feel that way compared to Q4 2023, when 63%  said prices were too high.

The largest discrepancies between buyer and seller expectations are in land, with 59% of respondents feeling land is overpriced. Office and multifamily are right behind, with 57% and 56%, respectively. Retail and hospitality properties are largely believed to be priced "about right," according to the survey.

The majority of survey respondents said they're sitting tight while market turbulence works its way out, with 42% saying they were managing existing assets and holding off on new investments. That's down from 57% in the prior quarter.

Interest rates are still the biggest concern for CRE, but 46% of those surveyed expect rates to decrease over the next 12 months. Just 8% think rates will go up, compared to 48% in the fourth quarter.

“The reported cost of debt financing seen in the market improved on the quarter, across different loan terms, rate types and collateral property types,” the report also found, with respondents reporting debt financing costs were down about 70 to 90 basis points quarter-over-quarter.

Atlus Group surveyed U.S. industry participants in late January and early February, with a total of 256 respondents representing at least 65 different CRE companies. All major property types were well represented among the respondents.

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