{"id":1004636017,"date":"2022-12-19T03:55:38","date_gmt":"2022-12-19T11:55:38","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004636017"},"modified":"2023-01-04T09:18:15","modified_gmt":"2023-01-04T17:18:15","slug":"where-to-find-opportunities-as-economy-decelerates","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/where-to-find-opportunities-as-economy-decelerates\/","title":{"rendered":"Where to Find Opportunities as Economy Slows\u00a0"},"content":{"rendered":"
\"\"<\/a>

Image by Gerd Altmann from Pixabay<\/p><\/div>\n

Investors are preparing for a challenging year, as weakening fundamentals and higher costs of capital will affect most commercial property sectors, according to CBRE<\/strong>\u2019s new U.S. Real Estate Market Outlook 2023: Opportunities Amid a Slowing Economy<\/a>.<\/p>\n

Office sector’s uneven recovery<\/h2>\n

Jessica Morin, CBRE research director and head of office research, notes that the office sector\u2019s \u201cslow and uneven recovery\u201d as the pandemic winds down continues to deepen the gulf between prime office buildings and second-rank properties. This in turn is creating challenges for those lesser-quality assets, even as both landlords and occupiers try to adapt to new working patterns.<\/p>\n

In 2023, Morin wrote, tenants will continue to shed underused office space, stacking even more availability onto an already generous amount of available supply.<\/p>\n

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READ ALSO<\/strong>: How a Looming Recession Impacts CRE Deals<\/a><\/p>\n

\n

Although most companies see office attendance as crucial, she said, \u201cOffice utilization rates likely won\u2019t meet employer expectations next year.\u201d The result might be a new equilibrium in which typical office space per employee is up to 15 percent lower than before the pandemic.<\/p>\n

As older buildings struggle to attract tenants, a glut of obsolete vacant space could increase the average office vacancy beyond the historical structural vacancy rate of about 12 percent caused by the supply of less desirable office space. While this might be mitigated by the removal of some undesirable space through demolition or conversion, Morin commented, \u201cfeasible office conversion opportunities represent a negligible share of total U.S. office inventory.\u201d<\/p>\n

Life science space market to moderate<\/h2>\n

In his commentary on the life science space market, Ian Anderson, CBRE senior director of research and analysis, predicts a cooling, or normalizing, process in which the economic slowdown moderates the sector\u2019s recent rapid expansion.<\/p>\n

He also notes, however, that life science is likely to retain its relative resilience as \u201cPandemic-fueled demand and capital infusion \u2026 give way to more normal market conditions, with better opportunities for occupiers.\u201d As the business cycle turns, expect to see more small bioscience companies seek partnerships or agree to mergers and acquisitions with larger life science companies.<\/p>\n

And though \u201cthe ongoing reduction in venture capital funding and dearth of equity financing is causing many life science companies to slow their expansion,\u201d Anderson adds that federal policymakers are doing more than ever in terms of life science investment. Proposed National Institutes of Health funding is up substantially for fiscal 2023, and that\u2019s in addition to the Biden administration\u2019s $2 billion in investments to expand U.S. biotech and biomanufacturing.<\/p>\n

Industrial’s resilience<\/h2>\n

James Breeze, CBRE senior director and Global Head of Industrial & Logistics Research, comments that industrial demand will stay strong by historic standards, though leasing activity is expected to moderate in 2023. Still, demand is likely to keep up with supply in the new year, making 2023 the 13th straight year of positive net absorption, along with near record-low vacancy and solid rent growth.<\/p>\n

He delves into the supply chain, as U.S. companies diversify their sourcing, to try to mitigate such possible disruptions as shutdowns at Chinese ports, labor issues at U.S. ports and the war in Ukraine. One strategy many are adopting is \u201cChina Plus One,\u201d in which a company relies less on China to supply products by adding other nations to their supply chain.<\/p>\n

In parallel with that, Breeze explains, other U.S. companies \u201cwill fully shift manufacturing to other Asian countries, while others will onshore manufacturing to the U.S. or nearshore to Mexico.\u201d<\/p>\n

Amid all this change, import trade will arrive through more U.S. ports, \u201cstimulating demand for nearby industrial space and along direct transportation routes to and from Mexico,\u201d benefiting such markets as Savannah, Ga., Charleston, S.C., Houston, Baltimore, Phoenix, Atlanta and Greenville-Spartanburg, S.C.<\/p>\n

More tactically, while Breeze expects industrial leasing to decrease by 10 percent to 15 percent in the coming year, to about 725 million to 750 million square feet, third-party logistics should lead leasing, bumping their share of leasing activity to 40 percent by midyear.<\/p>\n

Retail’s bright spots<\/h2>\n

And on the retail side, Brandon Isner, CBRE\u2019s Americas Head of Retail Research, says the sector could be \u201ca bright spot of 2023,\u201d with brick-and-mortar sales continuing to rebound, an ongoing consumer preference for shopping in stores<\/a> and a lack of new supply.<\/p>\n

As to the latter, he points out, \u201cRetail deliveries have reached record lows over the past three years, a trend that likely will continue in 2023.\u201d Further, 10 million square feet of retail space has been removed from the market just in the past five years.<\/p>\n

The counterpart to the loss of retail space is retail developers\u2019 and investors\u2019 focus on redesigning and redeveloping their existing space, especially in prime trade areas, \u201cwhich are experiencing record-high occupancy levels and asking rents due to strong demand,\u201d Isner wrote.<\/p>\n","protected":false},"excerpt":{"rendered":"

A new report explores the varying paths ahead for investors in 2023.<\/p>\n","protected":false},"author":882,"featured_media":1004586236,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,21748,21783,21754,23891,21742,21747,21749,51037],"tags":[32789],"class_list":["post-1004636017","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-industrial","category-investment","category-medical-office","category-national","category-latest","category-office","category-retail","category-trends","tag-cbre"],"acf":[],"yoast_head":"\nWhere to Find Opportunities as Economy Slows\u00a0 - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"In the face of a looming recession, office, life science, industrial and retail investors are preparing for a challenging year.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/where-to-find-opportunities-as-economy-decelerates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Where to Find Opportunities as Economy Slows\u00a0\" \/>\n<meta property=\"og:description\" content=\"In the face of a looming recession, office, life science, industrial and retail investors are preparing for a challenging year.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/where-to-find-opportunities-as-economy-decelerates\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2022-12-19T11:55:38+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-01-04T17:18:15+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2022\/06\/dollar-gecff514ab_1920.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Scott Baltic\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/where-to-find-opportunities-as-economy-decelerates\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/where-to-find-opportunities-as-economy-decelerates\/\",\"name\":\"Where to Find Opportunities as Economy Slows\u00a0 - 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