Welcome to First American Title NCS's CRE News Digest, where we cover the biggest news in commercial real estate. As a long-established brand that has been in CRE for over 120 years, First American understands the market and the forces that impact our clients' businesses.
The big picture: Emotions surge
This month, NAIOP released its semi-annual CRE Sentiment Index. The survey of more than 450 developers, brokers, analysts and other industry leaders found that the majority of respondents believe CRE conditions will be favorable over the next 12 months. The final score was 52 out of 100, with a score above 50 indicating that respondents expect CRE conditions to be favorable. This is the highest score since April 2022 and a six-point increase from the previous survey in September 2023. Notably, respondents indicated increasing optimism about capital market conditions, including debt availability, equity availability and cap rates.
Some industry leaders and experts echo the survey's positive sentiment. Victor Calanog, global head of research and strategy at Manulife Investment Management, told Benzinga, “As long as domestic and global economic growth remains on track, we see no reason to revise our forecasts downwards at this time.” In analyzing recent transaction volumes, Xander Snyder, senior commercial real estate economist at First American, said that while sales have slowed, they are “probably at or near the bottom…Volume is expected to recover toward the end of the year, certainly aided by potential interest rate cuts.”
State of the Industry: Retail
Retail real estate has enjoyed a relatively strong post-COVID recovery, especially compared to the struggling office sector. What some experts are calling a “retail renaissance” has been fueled in part by a long-term slowdown in construction, which has driven vacancy rates to near historic lows and rents to rise. According to Snyder's research, retail real estate square footage traded in the first quarter of 2024 up 46 million square feet from the third quarter of 2020, while office and industrial space transactions were flat or lower than the same period.
An emerging trend in the sector is rising demand for mixed-use “lifestyle centers” that combine housing, shopping and other experiential or outdoor spaces. “Retail that surrounds new housing will be more successful given their existing customers,” Bill Shopoff, founder and CEO of Shopoff Realty Investments, told GlobeSt. But some experts worry that a slowdown in consumer spending could slow growth. According to Commercial Observer, “The answer to that question will become clearer over the next 12 to 18 months as the market figures out how consumer spending numbers shake out.”
Innovation: Measuring TikTok's impact on CRE
TikTok's recent rise in popularity has had an impact across the CRE industry. The app has given brokers a new platform to network with potential clients and the industry. According to Bisnow, “the app has a tight-knit community of fellow CRE pros who refer deals to each other.” Other brokers are using the platform to “educate and engage people.” [CRE]TikTok's impact is also having an impact on local CRE where the company is seeking office space. Most notably, TikTok recently signed a 144,000 square foot deal in a new office tower in Nashville, following deals in San Jose and Seattle. But TikTok's future in the U.S. remains unclear, as does its long-term impact on the industry.