2023 Commercial Real Estate Outlook
There is a lot of speculation regarding a recession on the horizon in 2023. And, if true high interest rates and a potential recession will make 2023 a challenging year for commercial real estate. The top factors in 2023 to influence commercial real estate are geopolitical issues, inflation and rising interest rates which would impact all asset classes including Multifamily, Industrial, Retail and Office.
For more details, check out 2023 Commercial Real Estate Outlook by Al Brooks,
https://www.jpmorgan.com/commercial-banking/insights/2023-commercial-real-estate-trends
According to CBRE, “despite economic headwinds, the pace of change will not ease. ESG considerations and the growth of the digital economy will continue to affect real estate demand. Hybrid working offers many benefits for businesses and employees, but companies and the office sector will have to evolve. Cities too will need to adjust to new commuting patterns and reduced office demand. The resurgent retail sector is just now reaping the benefits of a long period of change, which is attracting keen investor interest. Data centers and industrial real estate will probably be the most resilient sectors and the housing shortage will benefit the multifamily sector. The hotel sector’s recovery from pandemic restrictions will continue but life sciences activity, which was turbocharged by COVID, will ease for a while as venture capital becomes scarcer. All sectors in all places will be required by governments, occupiers, and investors to make significant decarbonization efforts.”
While Joseph J. Ori, Executive Managing Director of Paramount Capital Corp. has the following top ten CRE predictions for 2023:
- Short-term interest rates will increase by at least 1.0%
- Capitalization rates will increase by 1.0% to 2.0%
- Cap rates for apartment and industrial properties will increase significantly
- The bid-ask spread for CRE property sales will begin to narrow
- Hotels will be the most favored investment
- There will be a sizable increase in CRE defaults and foreclosures
- The sunbelt states will continue to attract the majority of CRE capital
- Office investments and valuations in the gateway cities will continue to decline
- Industrial rents will decline more than 10%
- The single-family rental market will see reduced rents and higher lease defaults
Some very insightful predictions for 2023. Regarding your real estate assets, it is best to be prepared and mitigate as much liability as possible in any type of market. Therefore, if you have buildings built prior to 1996, be sure to have regular inspections to determine if seismic retrofits or structural strengthening is needed, https://saundersseismic.com/contact/.