The commercial property market remains distressed, with industry professionals expecting property values to decline further in certain sectors in 2024. But a national survey shows some expectation of conditions improving over the next year.
This year's polling results of sentiment from consultant RCLCO found that the industry is facing challenging conditions. The RCLCO Current Real Estate Market Sentiment Index, measured on a 100-point scale, remained flat over the past six months and ended 2023 at 15.47. That is a decrease of 3.5 points from mid-year.
An RMI less than 40 "is typically consistent with a period of real estate market distress/recession," according to the survey. More than 40% of survey respondents said they expected office values to end up at 20% below their peak less than two years ago.
Over the next year, most property sectors will "be in some stage of downturn, though some niche sectors such as self-storage, lifestyle, and grocery/necessity retail, and industrial are anticipated to have more resilience," RCLCO said in characterizing respondents.
However, from the survey responses conducted from Nov. 21 to Dec. 11, 2023, the RMI will increase 29.7 points to 45.17 over the next 12 months, "presaging a rise out of the zone of distress within the next year," RCLCO predicted.
"This is the second largest predicted increase we have seen," RCLCO Principal Kelly Mangold said in an email to CoStar News. She added that the only larger predicted increase occurred at year-end 2020, when the predicted jump was 36.6 points, compared with 29.7 points currently.