As the steam cools from strong demand in the 2022 real estate market, we look ahead to 2023. As the economy shifts, new trends are on the rise and demand is poised to respond. Below we take a closer look at some of the specific commercial real estate trends to watch for in 2023.
The Economic Effect
It’s no secret the economy is experiencing shifts. In late 2022, supply chain issues continued to some extent and inflation marked a 40-year high. The Fed is responding by steadily increasing interest rates. Changes in interest rates have a direct impact on the real estate market. While the economy always ebbs and flows, the most recent shifts, after coming off two years of incredible highs in the commercial real estate industry, changes in the economy will be something to watch.
The market segment expected to remain strong in 2023 is multi-family housing. With interest rates higher and both new and resale home inventories low, multi-family housing offers an alternative to those who either can’t afford a home or simply can’t find one that suits their needs.
One of the newest trends leading the charge in both Arizona and Nevada’s multi housing is “build-for-rent” communities. These commercial projects are residential communities featuring detached, single-family style units that are specifically built-to-rent. The communities typically feature many of the same amenities found in a small planned community with homes for sale or more upscale apartments. Community amenities can include a resort style pool and fitness center, community barbecue, dog park and other luxury features. Demand for new multi-family housing options is expected to remain high in 2023 as both Gen Z to Baby Boomers seek options and new residents continue to relocate to Arizona and Nevada.
The retail segment can expect some changes in 2023, depending on location and retail type. Neighborhood shopping centers in well-populated residential communities are projected to continue to flourish, while retail shops in downtown city centers are seeing challenges with more people working from home part-time. Fewer people working in downtown districts daily means less foot traffic and lower sales.
Forecasting for office buildings remains unknown for 2023. As many companies adapted to an ongoing hybrid work-from-home schedule to accommodate employee demand and cut costs, it poses a threat to the future of offices. However, Moody’s Analytics cites that no U.S. commercial real estate market has seen occupancy rates fall below their pre-pandemic 2019 levels. As we look to 2023 office trends, office space in good locations with top quality amenities is expected to continue to see demand.
Arizona and Nevada will continue to be hot markets for industrial and warehouse space, as e-commerce steadily increases. The growth of online shopping and demand or expectation from consumers to receive products in hand as soon as possible, means companies will need multiple warehouse locations to expedite shipping. The Southwest region offers available space, a welcoming business climate and a close proximity to ports for shipping. While companies remain interested in moving business operations to the area, 2023 is expected to remain lucrative for the industrial market.
Landmark Title has an experienced team of professionals with expertise in closing commercial real estate transactions. If you are a broker, investor or developer looking to make a commercial real estate purchase, contact us today to speak with one of our team members about how we can help.