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REBNY Index: Real Estate Broker Confidence Falls in 1Q18
July 2, 2018
Future leasing and financing conditions weigh on commercial and residential broker confidence
The Real Estate Board of New York’s (REBNY) Real Estate Broker Confidence Index for the first quarter of 2018 was 5.78 out of 10, a decrease of 1.21 since brokers were surveyed about the fourth quarter of 2017.
The overall decline in the Real Estate Broker Confidence Index was attributable to brokers’ concern for future leasing and financing conditions in both the residential and commercial real estate markets. However, several brokers noted that despite recent increases, interest rates are still low when compared to years past.
“Residential and commercial broker confidence was decidedly more upbeat in the fourth quarter of 2017, but market confidence in the first quarter of 2018 remained positive overall,” said John H. Banks, REBNY President. “Though the pace of transactions has slowed, REBNY brokers are seeing movement among well-priced inventory. Prices are continuing to undergo a natural correction with new developments and a more competitive leasing environment.”
The Commercial Broker Confidence Index in the first quarter of 2018 was 6.02, a decrease of 1.39 since brokers were surveyed about the fourth quarter of 2017 when they expressed confidence in their expectations of the recently-passed federal tax reform. The Commercial Broker Confidence Index has grown by 0.74 year-over-year, up from 5.28 in the first quarter of 2017.
Brokers’ assessment of the current leasing market in the first quarter of 2018 showed confidence with responses indexed at 6.49, dipping slightly by 0.23 since the fourth quarter of 2017. One office-leasing broker attributed current confidence to the effects of tax reform, writing, “tax cuts are already leading to hiring and expansion.”
Another commented on the challenges in commercial leasing, saying: “While the commercial rent tax has been reduced, it needs to be eliminated for retailers.”
The decline in the Commercial Broker Confidence Index was attributable to concerns about the leasing and financing market six months from now.
One commercial broker expressed uncertainty about the future, writing: “Who knows how [WeWork’s business model] will work out”.
The Residential Broker Confidence Index was 5.54, a decrease of 1.03 since brokers were surveyed about the fourth quarter of 2017. The Residential Broker Confidence Index, though still positive, has been trending downward since last year with the exception of a noticeable uptick in the fourth quarter of 2017. Meanwhile, confidence surrounding brokers’ expectations of the effects of the federal tax reform have leveled off.
The dip in the Residential Broker Confidence Index in the first quarter of 2018 was attributable in part to the question asking about the rental market six months from now. These responses were indexed at 5.01, a decrease of 0.53 since the fourth quarter of 2017.
“In rentals, concessions seem to be at an all-time high and I’m curious to see how that will affect the summer season. Renters are asking more and more whether there are ‘any concessions’,” said one residential broker.
Residential brokers also revealed some uneasiness about residential sales financing. Concerns about the current financing market were indexed at 7.17, a decline of 1.59 since the fourth quarter of 2017. The belief that the residential market benefited from tax reform may have boosted confidence in the fourth quarter of 2017. However, the residential broker responses in the first quarter of 2018 suggest that they have returned their focus to actual market conditions.
One residential broker stated, “Tax changes have not had a noticeable effect on demand in the first three months of the year.”
REBNY regularly surveys its residential and commercial brokerage division members to measure their confidence in the New York City real estate market now and six months from now. Survey results are published quarterly with a maximum index of 10.