2022 closed on a sour note for the commercial real estate industry, with some mildly encouraging macroeconomic news being more than offset by a lackluster transaction environment and a negative short-term outlook that was fueled by a challenging capital markets environment. The country as a whole is in a somewhat unique position. People are dealing with the pressures of significant inflation which most individuals born after 1980 have not really experienced in their adult life.
- Multifamily housing: The cocktail of supply chain issues, inflation and rising interest rates has presented challenges for developers and owners of multifamily assets which has manifested in a slowdown in transaction activity on the investment front and delays and repricing on the development front.
- Office: As offices have continued to sit vacant with many major markets still hovering around 15% office vacancy, questions regarding a return to the office shifted from “when” to “if” such a change would occur.
- Retail: While still somewhat volatile, the retail sector has shown strength and resiliency in the face of shifting consumer trends and the shock of the COVID-19 pandemic and emerged stronger than many would have expected.
- Industrial: Despite ongoing economic headwinds, industrial continues to outperform most real estate sectors with nationwide vacancy residing at all-time lows in the low-single digits and rent growth exceeding 10% to 20% on an annual basis.
- Capital markets: REITs traded higher in the fourth quarter, consistent with the broader equity markets, but ultimately underperformed relative to the same markets for the full year.
Continue reading the Q4 2022 report for further analysis, insight and outlook.