To say that 2022 was an unpredictable year would be an understatement. We continued to see the effects of the Covid-19 pandemic which flipped many industries on their heads, and the commercial real estate (CRE) industry was no exception. Remote and hybrid work changed the office space sector, and the cost of new developments shot way up, but it wasn’t all bad. Despite inflation, the commercial industry experienced growth which can be heavily attributed to CRE’s ability to appreciate over time and hedge against inflation. This article from MPA Magazine states, “Commercial bank revenue is estimated to grow 5.8% annually through 2026. Commercial bank assets are expected to increase 5% annually due to projected increases in loans and leases and inflation pushing up asset values.”
We’ve taken the good with the bad in 2022. Now we’re ready to look ahead. There will be opportunities for commercial real estate investors in 2023, and Calloway Title wants to help you prepare for success. We’re covering a few of the top CRE trends to look out for in the new year.
Return to Work
During the pandemic, millions of people started working from home, causing the demand for office space to go way down. Now people are returning to the office but with different expectations. In 2023, CRE firms will have to work hard to meet those expectations. Hesitance about returning to work is no longer based on fears of the pandemic but rather a cultural change. This Forbes article states, “Many employees who acclimated to a work-from-home lifestyle and experienced its benefits are resisting in-person mandates.” Hybrid work has become the standard for 70% of workers. To get employees excited about returning to the office, businesses and developers need to reimagine the office space, striking a balance between what’s worked in the office and what makes working from home desirable. In 2023, CRE developers will introduce more amenities into the office. Many will follow or take notes from the business model of hotels, creating a home away from home to entice employees.
The unpredictability of the pandemic taught us that working together may be vital to the success of our industry. This article from the Commercial Observer says, “There’s a need for collaboration, cross-selling and sharing of best practices to create the best communities for tenants and to grow the real estate industry as a whole.” More professionals are beginning to view each other as peers rather than competitors.
Of course, our team at Calloway Title is always happy to collaborate, help close your most complex CRE deals and share our unique expertise in commercial title insurance.
Upgrades and Flips
Construction costs are high, but development will still advance in the new year. However, upgrades and flips to existing properties will be an even bigger CRE trend, especially for hotel investors. “Around 80% of hotel investors said they’re targeting value-add investment opportunities in the sector,” according to this article from JLL. These deals are less expensive and a lot faster than new development deals. When upgrading a CRE property, the most important thing to consider is how to meet evolving guest trends and whether it is sustainable for the building.
We also expect to see CRE spaces being repurposed between different sectors. “We’ll be talking more about adaptive reuse – for example, the conversion of office to life sciences, residential and hospitality,” according to this article from the Commercial Observer.
There are positive investments to be found in 2023, especially in industrial, multifamily and data centers and student housing. The retail and residential sectors are also expected to continue their comeback. The Calloway Title team is here to help you open doors on every opportunity in 2023, and we hope this information can help you plan ahead. Let’s talk about how our team can help get your impactful projects across the finish line in the new year! Visit titlelaw.com, or call us at 888-537-9520.