The current commercial real estate outlook presents a mixed picture for the industry. The pandemic has had a significant impact on the office space sector, with rising vacancy rates in cities such as San Francisco, leading to falling property prices. The reduction in demand for office space caused by remote working is expected to continue, translating to a 15% decrease in demand per employee.
The market and overall economy faces numerous challenges, including rising interest rates and layoffs in some sectors that could reduce demand for commercial real estate. Nevertheless, there are still opportunities in the market, particularly for those willing to embrace risk. The industrial and data center sectors are expected to remain resilient. The hotel sector is also expected to recover further from the pandemic, and the housing shortage and high demand for suburban homes will continue to drive multifamily investments.
Investors are expected to focus on value-add, opportunistic, and core assets, with a focused interest in industrial, multifamily, and single-family rentals, self-storage, and data centers. The market is waiting to see whether it will take six to twelve months to see if opportunities are currently available. Overall, the commercial real estate outlook for 2023 indicates a mix of challenges and opportunities in the industry.