Forecast for CRE in 2023

Will real estate boom in 2023?  Before diving into future predictions, it’s important to evaluate the past. Although the CRE industry fell on hard times from 2020 and into early 2021, much progress has been made since. The latest commercial real estate data indicates that multifamily and industrial real estate continue to perform well. On the other side, the retail and hotel sectors are struggling to recover from gains lost throughout 2020 and 2021. 

As indicated in the chart below, all areas of the CRE market saw significant increases in value. The multifamily sector lead the charge, sitting at $315.4 billion—while the industrial and office sectors were valued at 160.2 and 136.3 respectively. Hotel and retail also had an impressive comeback from 2020 which was encouraging to see.

Source: Statista

Trends in Commercial Real Estate

So, what decisions influenced CRE’s inspiring comeback story? Here are a few of the most popular trends that are predicted to make a positive impact in the CRE world, according to JPMorgan: 

1. Increased Efforts to Update Infrastructure: Greater initiatives are underway as the nation pushes to create and update infrastructure. Enhancing roads and bridges will shorten commutes, help with last-mile deliveries, and likely improve the economy overall.
2. Understanding the Effects of E-commerce: Although the impact of the pandemic and rising popularity of e-commerce has dealt a blow to brick-and-mortar retailers, there are a few silver linings. Restaurants, hairdressers, spas, and other services have maintained their popularity—meaning the demand for brick-and-mortar real estate may be greater than previously expected.  
3. People Want Higher-End Rental Units: As the cost of homes continues to rise, many renters are choosing to upgrade their units instead of buying a house. Additionally, with so many people working from home and spending more time in their apartments, the demand for larger, higher-end multifamily units continue to increase.

All of these trends and more continue to shape the current state of CRE. But what lies ahead? Below, we’ll discuss the commercial real estate outlook for 2023 and explain the role data has to play in creating a more prosperous future.

What Is the Future Outlook for Real Estate?

As we stated above, the commercial real estate growth rate of all asset classes continues to increase. Although some markets are still in recovery (retail and hotel), the future is bright. Here are just a few of the future-facing factors influencing commercial property value based on predictions made by the Urban Land Institute (ULI).

1. Interest Rates: Current data indicates that commercial real estate will continue to grow despite rising interest rates. 
2. Transaction Volume: Commercial real estate transaction volume levels are expected to be slightly lower after a historic high was reached during 2021. However, forecasted transaction volume levels will still surpass pre-pandemic rates, with $800 billion in 2022, $725 billion in 2023, and $750 billion in 2024.
3. Vacancy Rates: Vacancy rates are expected to change minimally across all CRE sectors in 2023. According to ULI, industrial availability will remain low and essentially plateau. Apartment vacancies will remain tight and only inch up, and retail vacancies will remain steady at slightly below their long-term average. Office vacancy rates are expected to stay elevated and plateau at above their long-term average.
4. Price Growth: ULI also reported that price growth already tripled in 2021, compared to the past 5 years. Price growth is expected to remain at 10% throughout 2022, but is predicted to level off to 6.0% in 2023.

CRE Professionals Should Not Underestimate the Power of Data

As CRE professionals look toward the future, having accurate data is critical to make more informed strategic decisions. With the right data, developers can better estimate the cost of a project, and appraisers can easily compare similar properties and increase the accuracy of their property value reports. Data also allows brokers to create more competitive listings for their properties. In short, the right data benefits everyone involved in the CRE industry.

At Canyon Data, our mission is to provide the most accurate and complete data to enable all CRE professionals to make the most out of their investments. Unlike other companies that simply scrape data from open-source websites and platforms, we provide up-to-date data you can trust. Partnering with Canyon Data gives you: 

• Intelligent Insights: Having actionable data insights will make all the difference when it comes to future success. Our dataset is constantly being updated with the latest information, giving you access to every kind of demand driver needed to make fully informed decisions.
• Local Knowledge: Our local researchers are skilled in appraisal and work with our state-of-the-art A.I. to create comprehensive datasets.
• Unparalleled Information: Canyon Data is your one-stop shop for all local CRE information. We provide demographics, business listings, traffic maps, up-to-date building approvals, accurate occupancy data, and rental rates. 
• Trustworthy Data: We offer a precise multi-point CRE rating by verifying the accuracy of our datasets on a monthly basis.
• Unprecedented Efficiency: Tired of paying for multiple subscriptions? A single subscription to Canyon Data is more comprehensive and accessible than anything else in the CRE market.

Although we currently only operate in the CRE market of Boise, Idaho, we plan on expanding into Portland, Seattle and Salt Lake in 2022/2023. If you’re interested in learning more about how the Canyon Data difference can help your future planning, get in touch!