Commercial real estate business sentiment dropped for a second straight year amid growing caution regarding spending and market conditions, a survey by Deloitte showed Thursday.
The index measuring sentiment declined to 57.8 for the upcoming year from 64.9 in 2026 and 68.3 in 2025, according to the professional services firm.
"CRE executives surveyed are becoming more cautious about spending and market conditions," Deloitte said in a report. "Respondents plan to tighten spending in areas like office space and talent management, and they anticipate slower growth in rents and elevated vacancies."
The survey covered 950 c-level executives and their direct reports at CRE owners and investment companies with assets under management of $250 million or more. The survey was conducted in June and July, according to Deloitte.
Respondents cited cost of capital, capital availability and elevated interest rates as their top concerns for the next 12 to 18 months, the survey results showed.
"Those concerns could become more pressing as trillions of dollars in CRE loans mature in a potentially higher-for-longer rate environment, which could contribute to valuation stress and distress-led buying opportunities," Deloitte said.
Last week, the Federal Reserve raised its benchmark lending rate for the first time since July 2023 and signaled another hike later this year.
The Real Estate Roundtable's survey released in August showed that confidence among senior CRE executives was unchanged at 63 in the third quarter from the previous three-month period. The report showed improving property fundamentals and strong debt availability, but flagged concerns around subdued transaction activity and challenges raising equity capital.
Even homebuilder confidence remains muted amid elevated mortgage rates and rising material costs. Earlier this month, the National Association of Home Builders and Wells Fargo said US homebuilder confidence dropped to a one-year low in September.
Still, the Deloitte survey found that 41% of CRE executives expect revenue to grow 5% to 10% in the coming year, higher than 2026 optimistic responses.
Deloitte said that CRE continues to trail other industries in technology adoption amid rapid artificial intelligence developments. CRE firms face readiness constraints, including legacy processes, uneven data foundations and governance hurdles.
"Ninety-two percent of the surveyed respondents are in the piloting or research phase, while only 8% have integrated AI solutions," the firm said.
More than 90% of executives intend to increase spending on data and technology next year, up from 76% in 2026, the survey showed.
While over half of respondents see operational gains from AI, governance remains the main issue, the survey showed, adding that companies must establish strict controls over access, data usage and system monitoring.
Massive AI investments that are increasingly being financed with debt could trigger a selloff in equity markets if their expected returns fail to materialize, the International Monetary Fund said in its annual report.
