Even though it still feels like 2023 has just begun, March is already here. With the end of Q1 already in sight, it makes sense to start looking at commercial real estate scenarios for the second half of 2023. Here’s what you need to know.
Industrial
Although industrial real estate activity is expected to ease somewhat compared to 2022, this remains one of the most resilient and steadfast types of commercial real estate.
E-commerce activity, which helped propel industrial real estate to historic heights during the pandemic, still accounts for less than 15% of retail sales. The room for growth is still substantial and will fuel industrial growth for years to come.
In the case of Southern California, Industrial real estate could get an additional boost from its vicinity to Mexico. With companies looking for an alternative to China, Mexico is the natural choice, and some Southern California submarkets located near the U.S.-Mexico border are already reaping the rewards.
Office
This is the most embattled CRE category, hit hard by the rise of remote work and interest rate hikes. And with some prominent players defaulting on office loans, the short-term outlook isn’t exactly rosy.
All signs point to a challenging environment for office real estate during most of 2023. However, there’s a small silver lining, at least for Southern California. Medical office and life sciences are two sub-categories that buck the general office trend, which could help ease some of the downward pressure in markets with strong biotech presence like San Diego
Multifamily
Just like industrial properties, multifamily real estate has benefitted from strong fundamentals. In the case of multifamily assets, this includes factors such as strong job growth and demographic trends, all of which are expected to remain stable throughout 2023.
Here, some interesting investment opportunities may arise in at least two areas. On the one hand, the supply/demand imbalance will result in pressure to build affordable housing, opening the doors for new players. On the other hand, overleveraged developers and owners affected by interest rate hikes could start looking for rescue capital to shore up their balance sheets.
Chantel Aguilar: Your Commercial and Investment Property Expert in Orange and LA Counties
Whether you are a landlord or tenant, if you need help making sense of complex commercial real estate indicators, Chantel Aguilar can help.
Chantel has a proven track record of success in helping clients navigate even the most challenging CRE lease negotiations. Contact Chantel by telephone at 562-447-0665 by email at [email protected].
