The first half of 2023 was uncertain for those involved in the commercial real estate (CRE) sector. Interest rate increases, bank failures and concerns about a potential recession had an impact on investments and appraisals. LightBox recently released its annual “2023 Mid-Year Sentiment Report” based on a survey of their client base across all CRE market segments. The report highlighted how the slower-than-expected first quarter affected previous forecasts for a more robust second half of 2023, with only 15% of respondents indicating that their Q1 business volume exceeded expectations.
Respondents expressed concerns about pricing uncertainties, the likelihood of a recession and loan maturities due to Federal Reserve Effective Federal Funds Rate hikes as well as property price and valuation adjustments causing bid-ask spreads to widen furthering pessimism from those involved with the survey. Senior Vice President at LightBox Tina Lichens commented that this negativity wasn’t unexpected but noted it was rare for brokers to express such pessimism in surveys like these which typically reflect optimism due to sales mindset approaches taken by many brokers when responding..
Technology is playing an increasingly important role according to respondents who indicated they were looking into customer relationship management (CRM) systems or collecting data from third parties in order achieve business goals; however challenges remain including keeping up with new technologies, redundancy potentials or cumbersome processes leading some having unrealistic expectations regarding usage levels & results achieved through technology use .
Despite some negative outlooks , there are still opportunities available within CRE markets over next 12 months & beyond . Potential distress & anticipated loan maturities could pave way for loan sales/opportunistic acquisitions while capital sitting on sidelines can be used capture savings front end/secure properties w/right market dynamics . Lichens concluded by noting current downturn should be seen temporary situation versus underlying financial crisis workable over 18 – 24 months timeframe rather than long term issue requiring drastic measures
