Welcome to the Alabama Commercial Real Estate Index™ (AL CREI). The AL CREI measures commercial real estate expectations for the upcoming quarter gathered from a broad group of professionals working in commercial real estate and related fields. Eight key indicators create a composite index of overall market conditions and an outlook for specific property types. Through the survey, panelists can take the pulse of the state’s commercial real estate market as well as compare their own forecasts to those of their peers.
Click the “Register for the Survey” button below to register and complete the Q3 2024 survey beginning June 1st, 2023. If you are a returning participant, you do not need to re-register.
The Alabama Commercial Real Estate Index™ (AL CREI™) is a quarterly survey of commercial brokers, developers, property managers, investors/owners, lenders, and other industry professionals that measures market expectations for the upcoming quarter. An index value of 50 indicates a neutral outlook. Scores below 50 indicate a contractionary outlook while scores above 50 indicate an expansionary outlook.
In the Alabama Center for Real Estate’s survey, respondents in the Q2 2024 CREI™ registered a score of 51.3. This means commercial real estate professionals across the state expressed mild confidence that the statewide CRE market will expand during the second quarter. The Q2 index is 1.1 points below the Q1 CREI™, indicating a continuation of last quarter’s mild confidence in expanding market conditions. The Alabama market outlook and interest rates categories recorded scores above 50 for the current quarter, while the US market outlook and construction costs categories recorded scores below 50.
Confidence in commercial real estate market conditions varied by metro area in the Q2 2024 survey. The Birmingham-Hoover metro area recorded a score above 50 while the Tuscaloosa metro area recorded a score below 50. The Birmingham-Hoover metro area had the highest AL CREI™ score at 53.4 indicating that panelists are mildly confident in the expansionary outlook. Panelists from the area expressed moderate confidence that the statewide CRE market conditions would improve in Q2 when compared to Q1. The national CRE outlook had a lower index value of 52.9, indicating mild confidence in improving national CRE market conditions during Q2. Additionally, panelists are moderately confident that interest rates will decrease, and mildly confident construction costs will increase in Q2 compared to the previous quarter.
The Tuscaloosa area had the lowest CREI score of 47.9, indicating mild confidence in the overall contractionary forecast. Panelists from the area expressed mild confidence that the statewide CRE market will worsen in Q2 2024 from Q1 2024. Panelists are moderately confident that national CRE market conditions will worsen in Q2 from the prior quarter. Additionally, panelists from the area are moderately confident that interest rates will decrease in Q2 2024 compared to the previous quarter. Panelists are mildly confident that construction costs will increase in Q2 when compared to Q1.
Second quarter data is not available for Auburn-Opelika, Daphne-Fairhope-Foley, Huntsville, Mobile, Montgomery, and other metro areas as there were not enough survey participants from these areas to calculate a statistically significant score. However, ACRE projects that participation will increase for the third quarter 2024 survey.
This quarter, 4 of 5 commercial property types recorded index scores above 50. The index score for multifamily properties was higher than other property types at 54.9, indicating mild confidence in an expansionary forecast. The outlook for retail (51.9) and office properties also indicates mild confidence in an outlook for improving market conditions during Q2 2024 when compared to Q1 2024. Special purpose properties had a neutral outlook with an index of 50.0. Industrial properties had the lowest index of all property types at 46.9, indicating mild confidence in slowing market activity during Q2 when compared to Q1.
The AL CREI™ also calculates scores by industry to see how the outlook varies by profession. Commercial real estate brokers had the highest index of the group (55.7), indicating a continuation of last quarter’s moderate confidence in an improvement of overall market conditions. The current score is 1.0 point below the Q1 2024 score of 56.7. Commercial brokers are strongly confident that interest rates will decrease, and moderately confident that construction costs will increase in Q2 when compared to Q1
Panelists from other industries had the second-highest index of the group (50.4), indicating mild confidence in an improvement of overall market conditions. Other industries include consulting, appraisal, professional services, corporate real estate, and construction. These panelists are moderately confident that interest rates will decrease, and construction costs will increase during Q2 2024 when compared to the previous quarter.
Panelists working in development (48.4) had the lowest index of the group, indicating mild confidence in a worsening of overall market conditions. The current score is 2.0 points below the Q1 2024 score of 50.4. Developers are moderately confident that interest rates will decrease and mildly confident that construction costs will increase in Q2 when compared to Q1 2024.
Data was not available for property managers, investors/owners, and lenders as there were not enough responses to calculate a statistically significant score. ACRE expects that increased participation in the third quarter survey will produce index scores for these industries.
An additional component of the AL CREI™ is the Owners, Brokers, and Developers Index (OBDI™). Survey participants who own or invest in commercial real estate, broker commercial transactions, or develop commercial real estate responded to four additional questions about occupancy rates, new developments under construction, market rents per square foot, and capitalization rates (cap rates) in their specific property type.
The OBDI™ registered a score of 50.8 in the Q2 2024 survey. The current score is 3.4 points above the Q1 2024 score of 47.4, indicating a shift from mild confidence in the contractionary forecast to mild confidence in the expansionary forecast.
Occupancy Rates: With an index value of 55.5, owners, brokers, and developers expressed moderate confidence that occupancy rates in Alabama will increase in Q2 2024 when compared to the prior quarter. 44% of OBDI™ survey participants expect occupancy rates to increase from the previous quarter, while 34% expect no change, and 22% expect a decrease.
New Developments Under Construction: With an index value of 49.4, owners, brokers, and developers expressed mild confidence that new developments under construction in Alabama will decrease in Q2 2024 when compared to the prior quarter. 44% of OBDI™ survey participants expect the number of new developments under construction to remain the same as the previous quarter, while 29% expect an increase, and 27% expect a decrease.
Market Rents per Square Foot: With an index value of 50.0, owners, brokers, and developers expressed a neutral forecast for Q2 2024, meaning that market rents per square foot in Alabama are not expected to change when compared to the prior quarter. 51% of survey participants expect market rents per square foot to stay the same from the previous quarter, while 24% expect an increase, and 24% expect a decrease.
Cap Rates: With an index value of 48.2, owners, brokers, and developers expressed mild confidence that cap rates in Alabama will increase in Q2 2024 when compared to the prior quarter. The majority of OBDI™ survey participants (68%) expect cap rates to stay the same as the previous quarter, while 20% expect an increase, and 12% expect a decrease.