Consumer Confidence in the Commercial Real Estate Market: Our Survey Results!

SiteSeer asked. You answered. Here's a summary of our recent survey about people's confidence level in the commercial real estate market.

Two weeks ago, we decided to do a little research.

We're a research company, after all, and we recognize that the tools and services we develop for retail, real estate, and economic development companies must meet their needs. The SiteSeer platform is designed to help retailers make intelligent site selection decisions and commercial brokers and shopping center developers find the best tenants for their vacant space.

So, we wanted to know: how do people feel about today's today's commercial real estate market?

The results are in, and they're consistent with what we already know: today's landscape is confusing! Many of us in the world of retail and retail real estate feel this, and it's difficult to make decisions that way.

We had great response to our survey. Here's a summary.

Most are somewhat unconfident that the CRE market will see a resurgence this year.

About 44% of survey respondents are somewhat unconfident that the commercial real estate market will see a resurgence in 2024. However, 32% said they're somewhat confident that it will.

Most aren't sure about the timing of a turnaround.

About 57% of respondents were uncertain when commercial real estate might see a turnaround. And even though this question was posted to those who feel confident about a possible resurgence, 94% of all respondents still replied with their opinion. Clearly, people aren't sure when there might be a turnaround.

Most feel interest rates/cost of borrowing is the main reason for delays in CRE projects.

The vast majority of respondents--44%--said that interest rates/cost of borrowing is the primary factor causing delays in commercial real estate projects. The remaining respondents were mixed, with 25% saying the culprit is high construction costs, 13% saying consumer confidence, 9% saying some other reason, 6% saying retail sector confidence for 2024 and 2025 openings, and 3% saying the Presidential election.

Retailers shared that the factor that is most crucial to their confidence in opening new stores in 2024/2025 is reduced construction/leasing costs.

Reduced construction/leasing costs received almost half--48%--of the votes as to the primary factor that would make their company feel confident in opening new stores this year or next year. This is interesting given that respondents said that interest rates/cost of borrowing is the main reason for delays in commercial real estate projects; however, lower interest rates received the second highest number of votes (23%).

Most are planning to open the same number of stores or more in 2024 as compared to 2023.

A total of 44% respondents to our survey said they are planning to open about the same number (37%) or more (7%) stores in 2024 as they did in 2023 or would in a typical year. The same number (44% of respondents) said they were planning to open fewer stores. And 11% reported status quo: they had no store openings planned for 2024.

Looking ahead, more than half of respondents said they anticipated opening about the same number or more stores in 2025 compared to 2024.

This could be a hint of positive feelings as retailers and retail real estate professionals look toward the future. However, about 41% said they have fewer stores planned for 2025 compared to 2024 (or 2023-2024). It seems that there are mixed feelings about both this year and 2025.

The Bottom Line: There is Uncertainty, with Glimmers of Optimism

It will surprise few that there continues to be uncertainty about the commercial real estate market in 2024 and beyond. This affects the retail industry and the retail real estate industry and has caused many companies to think twice about their expansion plans until the landscape feels more secure...or at least more predictable.

What we've noticed at SiteSeer is that there are still companies planning and doing research and still many retailers that are interested in opening new stores if they identify the right locations. But retailers are very thorough in their research. They want to be confident that the locations they open are going to be successful. That's translating into deeper customer and competitive analysis too.

The Good News

There do seem to be positive signs, even in our survey responses. People are more unsure than gloomy about what is coming to the retail/retail real estate markets and their companies' plans for the future.

Analysts continue to hint that the retail sector is poised for moderate, steady growth. The National Retail Federation forecast in March 2024 shared that retail sales will increase in 2024 between 2.5% and 3.5% (compared to 3.6% annual sales growth in 2023).

But in March 2024, the Federal Reserve's Federal Open Market Committee opted not to adjust the federal funds rate, which governs overnight lending between commercial banks. They want to see more positive data about inflation receding before they do so. The committee meets six more times in 2024, so will they lower the federal funds rate this year?

SiteSeer Can Help You Position Yourself to Make a Move When the Time is Right

We hope this information is helpful and a little comforting as you navigate today's uncertainty. You're not alone if you have some hesitation!

Many companies are trying to plan for the future without putting themselves at risk. If SiteSeer can assist you as you do so, please reach out. Our platform is best known for its site selection analysis functionality, but it does so much more. We can help you analyze your existing portfolio of stores to ensure you're doing everything you can to serve your existing customers. If you're looking to expand when the market turns, we'll help you build models in the meantime so that you're ready to make a move quickly.