While higher interest rates slowed the commercial real estate market in 2022, I predict rates will fall in 2023 as the rate of inflation begins to decrease during the year.
The office market will improve as workers spend more time in the office and the supply of office properties diminishes as older buildings are converted to other uses. The multifamily rental market will also continue to be strong because of the high prices and lack of supply in the single family “for sale” market.
Our societal addiction to online shopping and continued “onshoring” of manufacturing will continue to be the driving demand for industrial space. I see the industrial market staying strong for the foreseeable future, but the brick-and-mortar retail businesses will continue to have some issues — mainly related to online shopping and employee staffing. However, as the rate of inflation falls more shoppers will likely return to the marketplace.
On the other hand, a prolonged recession will hurt retail sales and retail landlords may wind up losing some tenants. But then again, on the other end of the spectrum, land for industrial, residential, and mixed-use projects should continue to be in high demand.
From what I can see, after a little bit of a slow start, commercial real estate ought to experience a strong year in 2023.
Bill Adams, MBA, CCIM, CRB, ALC
Adams Commercial Real Estate