NEW YORK, June 23, 2021 /PRNewswire/ -- The CRE Finance Council (CREFC), the industry association that exclusively represents the $4.8 trillion commercial and multifamily real estate finance industry, today announced the results of its Second-Quarter 2021 CREFC Board of Governors' (BOG) Sentiment Index Survey and Special COVID-19 Survey. The results highlight continued positive outlook for commercial and multifamily real estate finance, with 83% of the Board having an overall positive sentiment for all commercial real estate (CRE) finance business over the next 12 months, up from 72% in Q1 2021.
CREFC's quarterly sentiment Index is derived from the Board's responses to 10 core questions on the state of the CRE finance market, which have been posed to the Board each quarter beginning in the fourth quarter of 2017. Q2 sentiment across the 10 questions is largely unchanged from the positive views reflected in the Q1 Index, underscoring continued positive outlook in CRE business over the next 12 months.
Adding to the continued confidence this quarter is the Board's shrinking negative outlook on CRE fundamentals and their impact on the performance of CRE finance-related business. Only 10% held a negative view of CRE fundamentals, compared to 13% in Q1 and down from 43% in Q4 2020. The primary area of concern expressed by Board members was the potential for government policy and regulation to negatively impact the performance of all CRE finance-related business, rising to 30% this quarter from 13% in Q1.
"As restrictions are lifted in states across the country and the economy reopens, we are hopeful for a strong recovery with investors eager to move off the sidelines," said Lisa Pendergast, Executive Director of CREFC. "Given increasing concern about government policy and regulations' impact on commercial real estate, CREFC is closely monitoring any and all decisions out of Washington that could impact the industry and will provide our members with the most up to date analysis possible. While we move further into a period of recovery across the industry, I look forward to the continued insights and perspective of our Board."
Special BOG COVID-19 Survey
In addition to the longer-standing BOG Sentiment Survey and Index, CREFC introduced an incremental survey beginning in the first quarter of 2020 focused specifically on the impact of the COVID-19 pandemic on CRE. The current quarter's results of the COVID Survey reflect a continued upbeat outlook:
Increase in Transaction and Lending Activity. The Q2 COVID survey showed a continued pickup in transaction and lending activity with nearly a third (31%) of members indicating that they are seeing more activity today than before the pandemic.
Surge in Lending Programs that are Fully Operational. Most of CREFC's lenders (88%) reported that their lending programs are fully operational, up from 71% in Q1, and only 5% indicating no new lending.
Leisure Travel Recovers while Corporate Travel Lags. Most board members (81%) expect a fast recovery for leisure travel, up from 76% in Q1. Only 14% of members expect the same of corporate travel.
Concern for Office Remains Post-COVID: Retail is joined by office (69%) as the property type that Board members are most worried about post-pandemic. Most (83%) believe usage of office and retail will change as a result of the pandemic.
Continued Stress on Retail Assets: By asset class, the BOG (48%) views retail as faring the worst and industrial (81%) outperforming all other asset classes during the pandemic. These views remain consistent following the pandemic, where the BOG (88%) expects retail to fare the worst and industrial (62%) to continue to outperform.
Eric Thompson, Chair-Elect for CREFC's Board of Governors stated that, "retail and hotel remain the most stressed in the economic wake of the pandemic, and the survey indicated concerns surrounding office performance post-COVID. However, foreclosure and REO assets have remained relatively low, and at levels well below those expected early in the crisis."
Detailed results for each question for both the Sentiment Index and COVID-19 surveys can be found here.
About CREFC's Board of Governors Sentiment Index
The CRE Finance Council (CREFC) is the trade association for the commercial real estate finance industry. More than 300 companies and 13,000 individuals are members of CREFC. CREFC's members play a critical role in the US economy through the financing of office buildings, industrial and warehouse properties, multifamily housing, retail facilities, hotels, and other types of commercial and multifamily real estate.
Nearly sixty senior executives in the commercial real estate finance markets represent CREFC's Board of Governors and hail from every sector of the commercial real estate lending and mortgage-related debt investing markets. CREFC Governors include balance sheet and securitized lenders, loan and bond investors, mortgage bankers, private equity firms, loan servicers, rating agencies, attorneys, accountants, and others. CREFC's Governors serve up to a total of six years on CREFC's Board and are all senior members in both their firms and the industry.
The goal of the CREFC BOG Sentiment Index is to gauge quarter-to-quarter shifts in market conditions for the CRE finance market and the outlook going forward. The BOG Index equally weights the responses to each question and then sums those weighted responses to create a single index.
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SOURCE CRE Finance Council