{"id":1004666135,"date":"2023-06-04T11:56:20","date_gmt":"2023-06-04T19:56:20","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004666135"},"modified":"2023-08-10T08:05:07","modified_gmt":"2023-08-10T16:05:07","slug":"cre-midyear-outlook-cautiously-optimistic","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-cautiously-optimistic\/","title":{"rendered":"CRE Midyear Outlook: Cautiously Optimistic"},"content":{"rendered":"

Near the midpoint of a year that was widely predicted<\/a> to see continued uncertainty in investment and development across all commercial real estate sectors, the industry appears to be adapting. Insights from a June 1 CPE <\/em>Voices webinar moderated by Editorial Director Suzann Silverman, which featured economists, operators and investment managers, detailed no shortage of challenges but also offered cause for optimism.<\/p>\n

\"CPE

Clockwise from left: Mark Gibson, JLL Capital Markets; CPE Editorial Director Suzann Silverman; Rebecca Rockey, Cushman & Wakefield; Sara Queen, MetLife Investment Management; Jodie McLean, EDENS; Mark Zandi, Moody’s Analytics<\/p><\/div>\n

The recession question<\/h2>\n

Despite widespread predictions of a recession occurring later this year or in early 2024, Mark Zandi, chief economist at Moody\u2019s Analytics<\/strong>, made the case that avoiding one is possible. Pointing to inflation that has moderated significantly from its high of 9 percent in July 2022, Zandi expects the rate to approach 3 percent by the end of the year, roughly 100 basis points shy of the Federal Reserve\u2019s goal. With lower inflation comes higher business and consumer confidence, as well as increased spending.<\/p>\n

Still, further sharp rate hikes by the Fed might undo this progress. \u201cIt\u2019s important to quell inflation, but to not do so too hard or too fast,\u201d Zandi said.<\/p>\n

Other reactions predicted a recession but downplayed the effects, with the same contingencies as Zandi\u2019s assessment. Mark Gibson, CEO Americas at JLL Capital Markets<\/strong>, sees a recession as an \u201ceventuality,\u201d as perceived by the industry, that has been driven by the Fed\u2019s moves. At the same time, the possible effects of a downturn are not set in stone<\/a>. Pointing to the positive effect of reducing inflation on narrowing bid-ask gaps and boosting deals, Gibson said, \u201cIf we have some consistency in communication and within economic policy, you will see transaction volumes increasing.\u201d<\/p>\n

\n

READ ALSO: <\/strong>Time for Brokers to Go Back to Basics<\/span><\/a><\/p>\n

\n

Investor behavior does not necessarily reflect a shortage of available capital, however. \u201cThere is not a lack of liquidity, but you may not like the price or structure,\u201d Gibson cautioned. Commenting on investors’ strategy, he added, \u201cThe past three years have been admirable, compared to the previous 30,\u201d with investor and lender underwriting including a \u201crecession-oriented\u201d risk component.<\/p>\n

Office ills<\/h2>\n

For the office sector, the outlook remains gloomy. Rebecca Rockey, global head of economic analysis and forecasting at Cushman & Wakefield<\/strong>, cited the sector\u2019s 18.6 percent national vacancy rate as \u201cthe highest on record,\u201d coinciding with supply that is rapidly tapering off.\u201d Here, a stabilization will occur only after \u201cretrenchment within the sector, (followed by) more absorption,\u201d she said.<\/p>\n

That scenario is unlikely to unfold any time soon, due to development and investment uncertainty, the work-from-home trend and the flight to experientially driven spaces.<\/p>\n

\n

WATCH THE WEBINAR: <\/strong>Midyear Outlook 2023: What to Expect in the Second Half and Beyond<\/span><\/a><\/p>\n

\n

\u201cWhen you had spikes, such as the dot-com bubble and the global financial crisis, there was a sense that the economy will recover, and people will come back to the office,\u201d explained Sara Queen, head of real estate equity at MetLife Investment Management.<\/strong><\/p>\n

Consequently, there is no industry-wide answer to these challenges. In what Rockey referred to as a \u201ctrifurcation,\u201d some office classes are performing better than others based on location, space quality and amenities. \u201cThe top 10 to 15 percent (of stock) is doing incredibly well, the next 30 percent are down, and the remainder we don\u2019t know,\u201d Gibson observed.<\/p>\n

\u201cIf One Vanderbilt had another five floors, they would lease in a week,\u201d Queen said.<\/p>\n

Industrial and retail hold steady<\/h2>\n

To a greater extent than the office market, the industrial and retail sectors offer ample development and investment opportunities, panelists said.<\/p>\n

Industrial development, which has a pipeline of 616 million square feet,<\/a> will likely experience a \u201cwave followed by a ripple,\u201d with vacancy peaking at 5.5 percent in the next 18 months, according to Rockey\u2019s analysis. The sector’s activity, attributable largely to a manufacturing boom and consumer demand, is only expected to grow. \u201cWe are going to see continued onshoring, (as well as) manufacturing and construction,\u201d Zandi predicted, pointing to the year\u2019s $170 billion in development deals, already approaching double last year’s total of $100 billion.<\/p>\n

Retail tells a similar story, with well-located, grocery-anchored space enjoying a high degree of success, particularly in areas experiencing strong in-migration; the national 5 percent vacancy rate continues to decline, according to statistics cited by Rockey. \u201cThere\u2019s very little supply side risk, and resilient demand,\u201d she said.<\/p>\n

Jodie McLean, CEO of EDENS<\/strong>, attributes this to a shift from a desire for durables, which peaked during the pandemic, back to services, where a physical store remains \u201cthe fastest way to have access.\u201d\u00a0McLean sees any successful retail development as dependent on the shopper’s experience. \u201cYou are clearly seeing department stores being redesigned,” she said. \u201cThere (have to be) places where if you bump into your neighbor you can sit down, and where you can spend time with and among your community.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

During the latest CPE Voices webinar, experts shed light on the industry’s widely varied prospects for the second half. <\/p>\n","protected":false},"author":3012,"featured_media":1004666139,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,22251,21742,21797],"tags":[32799,32850,44006,44078,34231],"class_list":["post-1004666135","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-in-focus","category-latest","category-webinars","tag-cushman-wakefield","tag-edens","tag-jll-capital-markets","tag-metlife-investment-management","tag-moodys-analytics"],"acf":[],"yoast_head":"\nCRE Midyear Outlook: Cautiously Optimistic - CPE<\/title>\n<meta name=\"description\" content=\"Insights from a wide range of commercial real estate executives and analysts on the industry's prospects for the second half of 2023.\" \/>\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\/cre-midyear-outlook-cautiously-optimistic\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CRE Midyear Outlook: Cautiously Optimistic\" \/>\n<meta property=\"og:description\" content=\"Insights from a wide range of commercial real estate executives and analysts on the industry's prospects for the second half of 2023.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-cautiously-optimistic\/\" \/>\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=\"2023-06-04T19:56:20+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-10T16:05:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2023\/06\/yiorgos-ntrahas-mcAUHlGirVs-unsplash-1-e1685744248361.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1998\" \/>\n\t<meta property=\"og:image:height\" content=\"1500\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Gabriel Frank\" \/>\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\/cre-midyear-outlook-cautiously-optimistic\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cre-midyear-outlook-cautiously-optimistic\/\",\"name\":\"CRE Midyear Outlook: Cautiously Optimistic - 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