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CRE Projections 2023: An Industry Outlook

CRE PROJECTIONS 2023: AN INDUSTRY OUTLOOK
 February 15, 2023 |  CRE News, Investment |  commercial real estate tenants, real estate trends, business tips

The Commercial Real Estate market saw plenty of ups and downs in 2022. Industrial-class properties performed well and office spaces saw a modest comeback. Still, pandemic recovery has been an ongoing process and 2023 will be more of the same on that front. For the latest updates on the variable nature of CRE, let’s break down the projections for each class.

Are We Heading For A Recession?
It has been called the million dollar question for some time, but there has been wide disagreement about whether a recession is imminent in 2023. Analysts have been using the distinctions of “deep” or “shallow” to define the severity of a potential recession, but others have predicted avoiding the possibility altogether. Consensus is pointing towards a better atmosphere than 08’s recession, but there is still plenty of debate about what 2023 holds.

For a start, market surveyors at Forbes have compiled a comprehensive overview of positive and negative indicators. With a rapidly improving labor market and signs pointing towards increased public spending, tempered expectations for the overall economy would be advisable.

The Future of Office Spaces
Perhaps the most interesting evolution within Commercial Real Estate has been the office space. After a massive hit to the industry as a whole due to the pandemic, there have been wide efforts towards limiting remote work that should continue revitalizing this sector. CEOs have been discussing their company’s strategy for returning their workers to the office. Whether through threatening layoffs or through incentives, it will be interesting to track which strategies see the most success.

Market researchers at Hubble have been tracking major company strategies for moving back to the office. Though there isn’t a ton of certainty in the CRE industry for 2023, widespread efforts like these bode well for office spaces. While it is unclear how closely office working standards will return to pre-pandemic conditions, the level of flexibility with hybrid and fully remote work is unlikely to continue.

Stabilizing Multifamily Rent
A recent topic of discussion breaking across federal party lines has been the soaring rent prices. Across America, tenants are largely spending more than a third of their income on housing due to the soaring rates in recent years. Motions proposed by the white house should stabilize this sector and drive down vacancies in theory. However, there may be an issue with a lack of alternatives in the marketplace.

Expect multifamily properties to remain strong and steady, with potential variability based on upcoming measures from the federal government. The actual impact of the proposed “Renters Bill of Rights” remains to be seen. At the very least, expect good news for tenants.

Brick-and-Mortar Resurgence in Retail
Projections regarding the demise of brick-and-mortar seem to have been greatly exaggerated. With a move towards remote life and the increase in online spending, many predicted that retail would struggle to recover in the long term. However, 2022 proved that in-person retail could recover more quickly than anyone previously expected.

Market analysts at Forrester have released their 2023 projections, predicting that three-quarters of sales in the US will take place in person rather than online. As a result of these findings, retail properties should continue their recovery in the same way that office spaces should rebound.

While many aspects of CRE remain ambiguous for 2023, there is room for optimism. Whether 2023 does see a downturn or not, a strong 2024 is certainly in view.

To remain competitive in a volatile real estate market, instill tenant confidence by keeping consistent with property maintenance. Schedule your next property inspection with NPI today!