CBRE (NYSE: CBRE) expects commercial real estate deal activity to contract 15% year-over-year in 2023, weighted by rising interest rates, a looming recession and a decline in available credit.
Some market participants agree that they expect a mild recession JP Morgan Chase the financial results announcementHowever, a deeper than expected recession is expected later this year, with Jefferies expecting a recession in the third quarter.
CBRE said investment in commercial real estate is likely to increase once interest rates and economic conditions stabilize in the second half of 2023.
About 60% of respondents expect to buy less property in 2023, and only 15% expect to buy more, according to the real estate services firm’s 2023 US Investor Intentions Survey. Nearly half of respondents expect he will cut property acquisitions by 10% or more.
Investors are hesitant to sell assets given falling market prices, with 60% of respondents saying they will sell less or not at all. Only 27% expect to sell the same volume as last year.
The most attractive commercial properties continue to be multifamily (multifamily housing) and industrial (led by modern logistics facilities). Grocery-focused centers are preferred by retail investors, while office investors prefer Class A properties in prime locations. The strong Sunbelt market remains attractive.
The survey also found that more investors are looking to take advantage of market downturns by adopting opportunistic and distressed strategies. Most respondents expect discounts of up to 30% across sectors, with shopping malls and value-added office properties likely to offer the biggest discounts.
Interestingly, about 70% of respondents expect their allocation to real estate to remain unchanged from last year.
See PIMCO’s Outlook on Commercial Real Estate.