Jeff Coyne is a director at GRS Group. He can be reached at 510.962.9534 or via email at

A commercial real estate downturn has been debated for several years now as investors wonder when the good times will end. Instead, even with some major macroeconomic uncertainty surrounding tariffs and the trade war, the recent government shutdown, Brexit, and other potential economic headwinds, the industry consistently has answered with strong-to-record years of activity and strong fundamentals.

However, the new RCLCO Real Estate Market Index showed a major drop in investor sentiment over the last six months of 2018, showing that there is concern that a commercial real estate downturn could be in the works.

The RCLCO-index drop was dramatic, coming in at 37.5 at the end of 2018, compared to 68 during the year’s mid-way point, on a scale of 100. This is the lowest index result since halfway through 2011. One-fifth of the investors surveyed said that the industry is already in a downturn, while 46 percent say that it is already here, or will begin, in 2019. That’s 16-percent higher than half way through 2018, and the index is expected to drop to the mid-20s by the end of 2019.

A lot of pessimism built between the six-month stretch of the two indexes. Market conditions for real estate are moderately or significantly worse for real estate than they were a year ago, said 48 percent of those surveyed. That’s up 33 percent from the survey given during last year’s halfway point. Meanwhile, only 28 percent said that market conditions were better than they were a year ago, down 29 percent from the prior survey.

A year from now, 60 percent expect retail real estate to be in a downturn, followed by multifamily, at 48 percent, and office, at 45 percent.

Though investors believe a downturn is gripping the industry, there doesn’t seem to be a major panic about the development. The good news is that this downturn, if it even exists, isn’t considered severe.  Sixty-three percent expect a moderate impact from the downturn, while 31 percent said the impact would be slight. Only four percent said it would be a severe event.

The reasons given for the low level of alarm are: continually strong fundamental average property performance, fewer markets experiencing overbuilding than in previous downturns and tight lending markets with less room for defaults.

So while uncertainty about the economy has given way to concern that a commercial real estate downturn is here or is likely coming this year, the effect of a downturn does not necessarily equate to an industry in trouble.

About GRS Group

GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.

Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance.  We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.