In the first quarter of this year, industry body CREFC Europe’s sentiment survey showed its members were slightly more positive in their outlook than previously. At the time, David Dahan, CREFC Europe’s industry initiatives director, suggested hopes interest rates had peaked might explain the uptick.
The Q2 survey, conducted between 8 April and 2 May, showed a modest further improvement in sentiment compared to three months earlier.
“Overall, the snapshot picture is very stable compared with Q1, with a slight improvement,” says Dahan. “There was a slight swing for most of the metrics, so the sentiment index scores did not move by much. But it shows there is perhaps a little more of a perceived sense of certainty about the market.”
The index score for sentiment around overall market conditions shifted from 0.15 in Q1 to 0.37 in Q2, which Dahan says suggests around 10 percent of respondents moved from having a negative to a positive outlook between quarters. Looking further into the results, Dahan says the indicator which tracks views about the availability of debt moved upwards, particularly for respondents in the UK market, where the score went from 0.24 to 0.77.
Expectations for the volume of new business have also improved.
“That, to me, suggests people feel that there’s a little more of a settled market, with borrowers and lenders starting to see alignment of pricing, meaning the capital that has been raised is starting to appear a little more in the market,” says Dahan.
Whereas in the previous quarter, improved sentiment around macroeconomic conditions was the driver for the overall lightening of the mood, Dahan says the Q2 survey did not show a further improvement in this area. “It’s hardly moved, and that’s not a surprise, because we’re still getting mixed signals from the central banks with respect to interest rates.”
Views on the political backdrop remained negative, he adds. “The index indicator for the political environment has been in negative territory for four quarters. So, this quarter, it remains negative but has not got worse.”
Marginal improvements
The overall moderate uptick, suggests Dahan, stems from how respondents feel about underlying property market performance. “The real estate fundamentals indicator is marginally positive – last quarter it was -0.01 and this time it was 0.09.”
Sentiment towards offices was somewhat improved, he says. “No sector stands out as being super positive in the way we had for two or three years running with logistics and accommodation. The one change has been offices, which is looking much better than it has done. The only reason I can imagine is there has been more messaging from some of the larger corporates, particularly in the tech sector, about mandating a return to the office.”
For Dahan, the survey results suggest respondents see the market as having troughed. “I don’t know for how long it will remain at the bottom – it could be a few quarters. But unless something exogenous happens, it looks like the industry is ready to pick up again. But it might not be next quarter.”
Describe in a few words how you feel about the market
“A great time to be a lender”
“Buyers and sellers seem to be getting closer on pricing but still a way to go before there is any significant dealflow”
“Feels like bottoming out or close to bottoming out overall”
“Uncertain”
“Stable but still stagnant in some sectors”
“I would have expected transaction volume to have increased, but banks are still willing to play the extend and pretend game”
“Slightly pessimistic due to sticky inflation”
“Cautious and sluggish, with glimmers of hope”
“Optimistic”
“Good opportunities are available, but there is competition for them. There are also still plenty of deals that can’t find refi options”
