Overall Consumer Confidence – The Invisible Force in the Commercial Real Estate Market
When analyzing the commercial real estate market, attention typically goes to interest rates, economic growth, or unemployment figures. However, much less is said about one softer but highly influential factor: consumer confidence. Yet it is exactly this that determines how bold businesses are in investing, expanding, and leasing or purchasing new commercial space.
Confident Consumers = Confident Tenants
It’s no surprise that when end consumers feel confident about the economy, they spend more on goods and services. This boosts business revenues and creates demand for additional space—be it larger retail units, extra warehouses, or new office showrooms. I see this daily: retail tenant activity moves directly in line with consumer sentiment. When consumers hold back on spending, businesses delay leasing new space.
Consumer Fear = Hesitation in Commercial Real Estate
When consumer confidence drops, businesses become more conservative. Fewer inquiries come in for rental spaces, sales transactions stall or get cancelled. Office space decisions are postponed, growth forecasts for warehouse needs become more cautious, and small investors step back. As a broker, you see this immediately—the pace slows and clients become more selective, especially financially.
Developers Closely Track Sentiment
Developers don’t just look at construction costs or projected yields—they closely monitor overall consumer mood. If consumers aren’t spending, tenants won’t expand. If tenants don’t expand, spaces remain empty. If spaces remain empty, projects are shelved. The cycle is that simple.
In My Work, I Often Track Sentiment More Than Economic Indicators
While consumer confidence can be measured numerically, I also sense it in the nature of client questions, the frequency of calls, and the speed of decision-making. When clients are calling more, asking specific questions, and moving quickly, the market is alive. When there’s a lull, it’s clear something has shifted in consumer expectations and perceptions.
What’s Ahead?
Low consumer confidence doesn’t last forever. Historically, it’s always cyclical—recovery follows decline. The only question is timing. The first half of 2025 may remain cautious, but if inflationary pressure eases and interest rates stabilize, businesses will regain the confidence to invest and expand. As Viljar Arakas put it, “Nothing happens overnight, but dear readers, we are at the point of trend reversal.”
Recommendations for Tenants:
• Use the quiet period to negotiate. The market currently offers more flexibility—in both pricing and terms. Landlords are open to discussion. With longer-term leases, it’s possible to secure rent-free periods or fit-out contributions.
• Review the efficiency of your current space. If demand has temporarily declined, assess whether your space is being used to its full potential. Consider consolidation or subleasing.
• Consider shorter lease terms. In uncertain markets, flexible leases allow quicker reactions to changes in demand.
Recommendations for Investors:
• Good time to take position. When consumer confidence is low and transaction volumes are modest, assets can be acquired at more favorable prices. Now is the time to identify motivated sellers and negotiate.
• Focus on stable tenants. Choose assets with tenants that have strong balance sheets and whose products or services are less affected by seasonal moods (e.g., logistics, healthcare, public-sector tenants).
• Be patient. In the next cycle, winners will be those who act now. A slow market doesn’t mean opportunities don’t exist—they’re simply harder to find and require more work.
Although consumer confidence won’t rebound overnight, the mood is shifting: phones are ringing more often, inquiries are more detailed, and decisions are made faster. These are the signals that the ice is starting to break. Now is the time to stay alert and ready—because those who act today won’t be watching others lead tomorrow. They’ll be the ones driving the next wave of growth.
