By Paul Bergeron
CBRE forecasts a 15% year-over-year drop in U.S. commercial real estate investment volume in 2023, although it will exceed the pre-pandemic record annual total in 2019.
Investment activity likely will bottom out in the first quarter and then gradually improve, it said. Then, by Q2 2023, a clearer picture should emerge about the terminal (max) federal funds rate and the overall economic outlook.
“Long-term yields and spreads should help reduce capital cost and allow for more sound underwriting. As a result, we expect quarter-over-quarter improvements in capital markets activity starting in Q2,” according to its report.
An informal survey of CRE pros by GlobeSt.com finds that, much like CBRE, while many are expecting a downturn in deals there still will be activity, whether it is from distress or maturing debt. Here are some of their views with more coming tomorrow.
Capital Remains Available
Patrick Nutt, Executive Vice President, NNLG/Market Leader South Florida, SRS Real Estate Partners, tells GlobeSt.com that capital remains readily available.
“However, investors are hoping to be patient and not ‘catch a falling knife’ by making acquisition decisions before reaching peak terminal rates.
“Volatility will continue as we read every Fed note with granular detail and observe how the economy adjusts as growth slows, inflation cools and labor markets ease. The fundamentals thus far have remained exceptionally strong (tenant demand, consumer behavior, etc.) but we anticipate some secular softness but likely not a widespread pull back across all retail.”
An Increase in Recapitalization Requests
Brian Murphy, managing partner, CEO, Veleta Capital, Los Angeles, tells GlobeSt.com that following the recent rate hike, he is more confident in his firm’s near-term projections and anticipates an increase in regular-way transaction volume in Q2.
“We have observed an increase in recapitalization requests and have proactively provided rescue capital to some apartment sponsors,” Murphy said.
“We expect this trend to continue throughout the next year. Overall, we remain optimistic about the market opportunities in 2023 and will continue to closely monitor and adapt to market trends.”
Good Signs for a ‘Healthy’ Real Estate Market
Tomas Sulichin, President of Commercial Division at RelatedISG Realty tells GlobeSt.com that buyers and sellers will encounter a more stable market prone to give buyers more options such as through a slight increase in inventory.
In the past years, he said, “buyers and tenants have been at the hands of owners and landlords, and we will soon see a market stabilization. These are all good signs of a healthy real estate market, which is cyclical.”
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