Business & Finance

Commercial Real Estate Forecast for 2023

Commercial Real Estate Forecasts and Trends (Outlook) for 2023
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As of 2021, the global real estate market was valued at $3.69 trillion, as revealed by Grand View Research. Back then, the market had just started to recover from its fall during the COVID-19 pandemic. Safe to say, despite the bumpy ride, the market managed to recover rather fine. So, let’s understand how the global commercial real estate market might look this year.

Interestingly, not only has the real estate market almost gotten back to pre-pandemic states, but it has also been showing growth like never before. Data from the Real Estate Market By Property (Residential, Commercial, Industrial), By Business (Sales, Rental), By Type (Land, Buildings): Global Opportunity Analysis and Industry Forecast, 2021-2031 report shows that this market will hit a value of $48,923.3 billion by 2031. Thus, it’s safe to assume that at this rate, the global real estate market will surpass all its previous records and usher into a new era.

However, will all types of real estate follow a similar growth trajectory?

More importantly, will the growth continue to be the same in 2023, or will it see a drop? These are questions that keep businesses, investors, and real estate experts awake at night. Today, we’ll look to cater to a small part of their curiosity by discussing the forecast for commercial real estate in 2023.

Check out 6 commercial real estate forecasts and trends for 2023 below:

According to Technavio, between 2022 and 2027, the global commercial real estate market will grow by $260.37 billion. This takes the year-over-year growth rate of the market in 2023 to 2.4 percent. Technavio’s report on this matter refers to the growth momentum of this market as “accelerating,” which promises a lot of positivity and prosperity from this market.

1. Not the same situation everywhere

In a 2021 Wales247 article, David Kezerashvili, owner of a real estate investment firm based in Ukraine, claimed that market knowledge surrounding the Ukraine real estate sector was vital to understand the possibilities this market had to offer.

Whether it’s a commercial property or a residential one, Kezerashvili’s insights suggested that Ukraine’s real estate market was indeed seeing huge growth. Getting in touch with the right real estate investment experts was more than enough to land a world-class real estate deal in the country.

Sadly, in early 2022, Russia attacked Ukraine, and the country soon became the center of a major 21st-century war. With that, this growth plummeted to the ground. Commercial real estate could’ve been a huge thing in Ukraine/ There was adequate demand and supply, as well as enough market experts to help people land their desired real estate deals. As the war in Ukraine continues, it’s hard to say how this sector will look in 2023.

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2. People returning to physical workplaces means a growing demand for commercial real estate

Between 2020 and 2021, working from home became a norm. The COVID-19 pandemic fueled this change and managed to turn it into a trend. With more and more employees putting their health ahead of everything else, employers had no other option than to allow their employees to work from the comfort of their respective homes.

However, as the situation with the pandemic is a lot better now, a return to the physical workplace is unavoidable. While some offices will continue to allow their workers to work from home, the majority of employers are asking their employees to return to the office.

In 2022, this return to the physical workplace had already gained momentum. As we venture into 2023, working from the office will once again become the norm.

This return means that employers will once again look for commercial spaces to accommodate their workforce. Besides, the startups born during the pandemic will also look to move into an office building. They, too, will play a huge role in the growth of rental commercial properties and real estate.

3. Suburban commercial spaces will see a high demand

Suburban commercial spaces will see a high demand

Businesses will opt for short-term leases on their commercial properties. That means the office spaces they occupy can be leased for two to five years. These short-term leases offer more flexibility which many businesses feel is vital, given that they might need to move to a bigger space depending on their growth.

Suburban commercial real estate will see a huge demand in this regard as they are far cheaper and offer just enough space for small offices.

The state of commercial real estate in 2023 will indeed be exciting and eventful. Coming out of a global pandemic and into the ongoing war between Ukraine and Russia, this particular sector will have a lot of challenges coming along its way. Only time can tell how the commercial real estate sector will adjust to all these things happening around it.

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4. Increased focus on sustainability

As environmental issues become more prominent, businesses are increasingly looking for ways to reduce their carbon footprint and implement green initiatives. In 2023, we can expect to see a shift in investment focus as investments target energy efficiency and buildings that use resources responsibly. This could lead to an increase in demand for sustainable buildings, especially those certified by LEED or BREEAM standards.

We may also witness an increase in demand for sustainably operated buildings among both tenants and potential buyers, resulting in higher values for those properties that meet the criteria. New incentives from local governments could also drive sustainable development over the next few years.

These initiatives could create an even bigger shift towards Sustainable Real Estate Management Systems, making it one of the major commercial trends to watch over the coming years.

5. Rise of proptech

The rapid rise of proptech has been transforming the commercial real estate field in incredible ways. According to the most recent forecasts, 2023 is set to usher in a multitude of exciting changes that will revolutionize and optimize the real estate industry.

By utilizing advanced technologies such as artificial intelligence (AI), data-driven analytics, cloud computing, blockchain, and more, real estate professionals and developers are tapping into previously untapped potentials with cutting-edge solutions for buyers and tenants.

Due to this developing trend, these advancements are expected to create greater transparency and cost savings for consumers by providing ever-increasing insights into market trends and pricing. Furthermore, new connected systems enable users to leverage technology to manage their listings, tenants, and processes with ease from anywhere in the world.

Proptech’s continued growth over the coming years promises an increasingly convenient experience for all parties involved in commercial or residential real estate transactions.

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6. Reinvention of retail

The pandemic has pushed many retailers to reevaluate their strategies and invest more in digital transformation. This will likely lead to a shift in consumer habits towards e-commerce and experiential retail formats, which could affect the demand for certain types of commercial real estate.

Research suggests that by 2023, we can expect major shifts in consumer preferences and behavior, along with a host of new trends driving how retailers engage customers. Analysts predict greater investments in omnichannel capabilities across all platforms, renovations for existing centers to better meet consumer wants and needs, as well as more focus on physical spaces providing social experiences and entertainment rather than just traditional shopping destinations.

The reinvention of retail may require inventive strategies and continued adaptation amongst landlords and tenants alike–but these changes could also hold an array of opportunities. It promises to be an exciting time as the retail industry continues to morph over the coming years!

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So, we discussed what the future holds for commercial real estate by explaining the forecasts and trends above. While there are always variables and sector-specific considerations to keep in mind, these macro-level insights should give you a broad idea of what to expect in the coming year – and how to adjust your investment strategy accordingly.

Hope this article helped you get some useful insights. If you have any questions, please leave your comments below.

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