Trepp, a data analytics company covering the commercial real estate sector, just released their 2022 CRE Sentiment Survey. While the survey’s findings reveal that the U.S. commercial market isn’t on the precipice of total downfall, it doesn’t exactly offer a sunny outlook.
From July 13 to the first of August this year, Trepp surveyed more than 20,000 respondents regarding the near-term outlook for the commercial real estate (CRE) and commercial mortgage-backed securities (CMBS) sectors. The majority of respondents said they were involved in the commercial real estate industry. Other significant participant groups were those from academics, capital markets/structured finance, and banks.
The good news is that almost three-quarters of respondents said their companies were either unchanged or growing compared to the previous year. When it came to the near-term hiring status of real estate companies, a whopping 88 percent of the respondents said that they are either maintaining their present staff or looking to hire more. But that’s about where the glimmer of positivity ends.
Over 90 percent of respondents agree that a recession is on the horizon, it’s only a matter of when. A quarter expect the decline in economic activity to start at the end of 2022, but most agree that the economy will tumble sometime in 2022, with a few holding out hope that a recession will be as far off as 2024.
Respondents were more upbeat about commercial leasing activity than sales activity, but overall, most are expecting financial pain ahead. Nearly 83 percent anticipate an uptick in delinquencies on commercial real estate and commercial mortgage-backed securities over the next six months, an abrupt shift from the decline in late payments in recent years.
CRE professionals are overwhelmingly worried about inflation and rising interest rates as the majority of respondents anticipate that both will negatively affect their industries before 2022 is over. However, they also believe that commercial real estate will be spared from the “worst case scenario” of these economic challenges. It’s certainly not a glass half-full attitude, but it could be worse.