By Erika Morphy
WASHINGTON, DC—Commercial real estate executives are optimistic about 2020, according to the Real Estate Roundtable's 2019 Q4 Economic Sentiment Index. “Our Q4 Sentiment Index shows that macro real estate markets remain fundamentally sound and reasonably leveraged, with balanced supply and demand,” says Real Estate Roundtable President and CEO Jeffrey DeBoer in prepared remarks. “The markets continue to benefit from business and consumer spending, encouraged by low unemployment, rising wages and low energy prices.”
Yet something is amiss. The Q4 Sentiment Index dropped one point from the previous quarter to register a score of 49; a score of approximately 50 is viewed as positive. In addition, the Q4 Future-Conditions Index, which is part of the overall Sentiment Index, decreased three points from Q3 to reach 45.
The index highlighted a handful of issues that may be concerning CRE executives; chief among them was the fear of recession next year. To be specific, executives surveyed for the index said they were afraid that the markets would talk themselves into a recession. It is easy to see how this could happen. Right now the main driver of US economic growth is consumer spending; business investment, by contrast, has been lackluster. If consumers were to become convinced a recession was on the way, they would undoubtedly scale back their expenditures. Read more.