Commercial Real Estate Brokers' Confidence Sinks To All-Time Low
New York commercial brokers — faced with a complex array of market challenges — are gloomier about their prospects than they have been at any point in the last six years.
The Real Estate Board of New York’s Real Estate Broker Confidence Index report for the first quarter of the year showed the current confidence index for commercial brokers was at -74.7 in Q1, down from -45.6 in the last quarter of 2022. That number represents the lowest confidence level since REBNY started running the survey in Q3 2017.
A score of 0 represents neutral sentiment. At this point in 2022, commercial broker confidence was positive, with a score of 17.1.
REBNY's commercial broker expectations index, which measures a six-month outlook, dropped to -56.9, also an all-time low, and down from -20.7 from three months ago.
“Higher borrowing costs, looming loan maturations and uncertainty regarding office demand have dampened commercial sentiment and overshadowed positive hospitality and retail activity over the last quarter,” REBNY Director of Market Data Keith DeCoster said in a statement.
Notably, REBNY noted that office visits in New York City dipped in the first quarter after three straight periods of growth, while leasing momentum also backslid to start the year. Those headwinds, compared with the capital markets environment, drove commercial brokers' confidence to an even lower level than in the second quarter of 2022, the previous low, when the confidence index was -64.3 and the expectations index was -33.7.
Before 2020, neither confidence indexes had ever had a negative reading in the 11 quarters tracked.
Residential brokers, on the other hand, are feeling a little more buoyant. The residential current confidence index improved to -5.6 in the first quarter, up from -19.4 in Q4. The residential expectations index, however, fell slightly to 11.7 down from 12.9 in the prior quarter.
“Fortunately, the residential sector, which was so critical to the city’s resurgence in 2021 registered improved sales and sustained leasing,” DeCoster said. “Residential brokers underscored these strengths but reiterated long-standing concerns about obstacles to housing development as well as growing concern about financial sector instability.”
Residential rents in New York have risen to new highs this year, hitting a new record in Manhattan last month to reach a median of $4,241, breaking March’s record of $4,175, per Douglas Elliman.
Office leasing, by contrast, is far more feeble: Last month, 1.5M SF of office leases were signed in Manhattan, according to Colliers. That marks a nearly 44% decrease from a year ago and a 7.7% drop from March.
Meanwhile, the investment sales market is experiencing a major slowdown, as buyers and sellers grapple with the environment of increased interest rates. The situation has been deeply challenging going back to last year.
“It can be very exhausting,” Meridian Capital Group Senior Executive Managing Director Helen Hwang said at a Bisnow event last year. “So every morning I wake up, take two shots of espresso, come in every day like it's a new day, because you have to have the tenacity, you have to have the focus, you have to have optimism.”
