“E-commerce will likely serve as a tailwind for the logistics industry-and industrial warehouse and distribution properties-for at least 10 years,” Calanog said. “All the way from investments in last-mile distribution complexes to drones.” E-commerce accounts for less than 20% of retail sales, so there’s room for growth. “E-commerce’s need to get products into consumers’ hands sooner is what’s driving a lot of innovation,” Calanog said. But they can adjust rents annually-sometimes even monthly-to account for market changes.Īs e-commerce increases, so does the need for warehouses and industrial space. Multifamily owners and investors aren’t immune to cost increases. “As of the third quarter of 2022, multifamily vacancies are at 4.4%-a five-year low,” said Victor Calanog, Head of Commercial Real Estate Economics at Moody’s Analytics. Multifamily is currently the highest performing of all asset classes.
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Full recovery would take place over years, not months, and impact all asset classes. A 2023 recession would likely be a more traditional one. The pandemic’s economic impact largely mimicked that of a natural disaster on a national scale, but the economy bounced back over several quarters. Together, these factors may lead to a mild to moderate recession in 2023. There may be an upside for multifamily owners and investors, as higher interest rates may cause potential homeowners to remain renters for longer. The Fed anticipates more increases into 2023, which could negatively impact commercial real estate owners. Rising interest rates: As of the November Federal Open Market Committee meeting, the target federal funds range is 3.75% to 4.0%-a level last seen in 2008.Many tech giants, for example, are concerned that their entry-level employees can’t afford housing anywhere near Silicon Valley. These rising costs not only affect affordable and workforce housing, but also market rate housing.
The owners’ equivalent rent of residences was up 6.9% from the year before. Rent was up 7.5% from 2021 as of October 2022. Inflation hasn’t been this high since the 1980s.
How macroeconomic forces could impact commercial real estate Multifamily properties continue to perform well, and the hot streak for industrial properties remains.Īs we head into the new year, keep an eye on these 2023 commercial real estate trends and opportunities. But there are a few bright spots in the commercial real estate forecast. Plus, supply chain issues persist, and inflation is near 40-year highs, prompting the Fed to steadily increase interest rates. Retail is at a crossroads, and the future of office space is unclear. The 2023 commercial real estate outlook indicates there may be challenges ahead.
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