Navigating Uncertainty – Risks and Opportunities in Commercial Real Estate

Navigating Uncertainty – Risks and Opportunities in Commercial Real Estate

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William Pattison Michael Steinberg Derek Tong Jacob Kurosaki Kiel Deitrich
MAY 11, 2023

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Executive Summary

  • We expect a modest recession in 2023, with full-year GDP growth of 0.9%. 
  • MIM’s custom-built index of market discount rates was compared against bond yields; it suggests real estate is offering fair to modestly attractive relative value today. 
  • Markets with high exposure to both tech and residential construction labor could underperform in 2023. 
  • We expect office vacancy to rise an additional 120 bps by year-end 2024, before beginning to decline. 
  • Outside of office we expect healthy rent growth in industrial, retail, hotel, and select apartment markets; we do not expect apartment rent growth to keep up with expense growth in some sunbelt markets.