TUSCALOOSA, Ala. — State leaders in the Commercial Real Estate (CRE) industry continue to be concerned about the nationwide and statewide CRE markets, according to the latest quarterly survey by The University of Alabama. The Alabama Center for Real Estate’s (ACRE) latest Commercial Real Estate Index, taken in early September, decreased slightly indicating another forecast for reduced market activity during the fourth quarter of 2023.
Why it matters: While respondents forecast higher occupancy rates, and higher market rents per square foot, cap rates and construction costs are expected to rise. As a result, the statewide CREI was once again under the neutral mark of 50 (42.1). The index, which was 0.1 points below the Q3 2023 CREI, indicates a continuation of last quarter’s moderately confident contractionary forecast.
By the numbers:
- Statewide Outlook: With a Q4 2023 index of 48.5, survey participants expect a contraction of CRE market conditions in Alabama with mild confidence.
- United States Market Outlook: With a strongly confident index of 38.7, survey participants expect a contraction of CRE market conditions in the United States in Q4 2023.
- Interest Rates: With an index of 39.0, survey participants expect with strong confidence an increase in interest rates in Q4 2023.
- Construction Costs: With an index score of 42.1, survey participants expect with moderate confidence an increase in construction costs in Q4 2023.
- An additional component of the AL CREI is the Owners, Brokers, and Developers Index (OBDI™). The fourth quarter survey resulted in an index of 46.6, indicating mild confidence in a slowdown of overall CRE activity.
What they’re saying: “We were excited to see increased participation for the fourth quarter survey,” ACRE Associate Director Stuart Norton said. “The forecast is a combination of favorable and unfavorable market activity. Cap rates and construction costs are expected to remain elevated, representing a higher level of risk. However, occupancy rates and market rents per square foot are expected to increase, indicating a favorable outlook in these areas, but also highlighting the expected slowdown of CRE sales and leasing activity.”
The AL CREI™ and AL RREI™ will be offered once a quarter to be a forward-looking tool for the industry. To become a participant for the fourth quarter, register for the commercial index on the ACRE website.
Susannah Robichaux from the Alabama Center for Business and Economic Development assisted in the report through data collection and processing. Senior Graphic Designer at the Culverhouse College of Business, Katie Howard, is credited with the graphic designs in the report.
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The University of Alabama, part of The University of Alabama System, is the state’s flagship university. UA shapes a better world through its teaching, research and service. With a global reputation for excellence, UA provides an inclusive, forward-thinking environment and nearly 200 degree programs on a beautiful, student-centered campus. A leader in cutting-edge research, UA advances discovery, creative inquiry and knowledge through more than 30 research centers. As the state’s largest higher education institution, UA drives economic growth in Alabama and beyond.
