Q4 2022 Real Estate Market Report

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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.

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Key takeaways:

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.