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‘Everything Is In Flux': Bisnow Readers Warn 2023 Will Get Off To A Rocky Start


Heading into a new year, the commercial real estate industry finds itself in choppy waters amid fears of a recession, rising inflation, interest rate hikes and projects that have been put on pause as market players await a course correction.

Those responding to Bisnow’s 2023 predictions survey candidly said they are struggling to navigate more than this time last year, despite positive sentiments for certain parts of the country and several asset classes.

And they expect the turbulence to continue, at least in the short term, with an overwhelming majority reporting they think a recession is happening or will happen next year.

Some said the industry will suffer more than the general economy.

“Let me be specific: I think a commercial real estate recession is coming,” said Colliers Houston President Patrick Duffy, adding that that might not hold true for the economy at large given low unemployment and other indicators pointing away from an overall recession.


Only 5.5% of readers surveyed told Bisnow they do not think there will be a recession at all. Thirty-eight percent said we are in a recession now, and another 42% said they expect a shallow recession in 2023.

Like Duffy, 14.8% of the 386 respondents who took the survey between Nov. 11 and Dec. 7 expected a deep recession is on the way.

Meanwhile, many expect real estate to be stuck in a holding pattern for at least some of 2023 as skyrocketing interest rates, rising inflation, a liquidity gap and a widening chasm between seller and buyer expectations have ground many sales and developments to a halt.

More than half of respondents said they expect there to be fewer deals closed next year, with the rest split between predicting the same number of deals and more deals closing. About half said their exit strategies across their portfolio will stay the same, while 42.7% said they expect to hold onto their properties longer. 

Greg Moyer, partner for Chicago-based Moyer Properties, has four projects financed and was ready to break ground on them. But all four have been put on hold. 

“I just think it’s a bad time to be going in the ground,” Moyer said. “I’m not optimistic that '23 is going to be a busy year from a development standpoint. It ebbs and flows. I think there are going to be more opportunities on the acquisition side than the development side.”

Before resuming the projects, Moyer said he wants to see what will happen with a potential recession, inflation and interest rates.

Those concerns align with most respondents'. Just over 60% of them ranked interest rates as their No. 1 economic challenge going into 2023. Another 22% ranked it as their No. 2 concern, contributing to more than 91% of all respondents placing interest rates among their top three economic challenges for 2023. 

Inflation was the second-highest-ranked economic concern, with 63% putting it in their top three. Finding qualified labor was also a top concern, with 43.5% ranking it in their top three.

James Gorbin, an engineer in the Los Angeles area, said economic fear has prevented many deals from going through.

“It’s difficult to budget when everything is in flux,” Gorbin said. 

Gorbin knows budgeting fears well, having been recently laid off from a design firm. His layoff was partly because rising interest rates slowed the firm’s work, he said. 

As a result of that slowdown, about half of Bisnow readers surveyed said they think their company’s headcount will stay flat for the next two years, while 27% expect to increase staff.

Just under 24% said they plan to cut staff in 2023. Some of the biggest names in CRE have already announced staff reductions, including layoffs at Avison Young, a “global transformation” at JLL and $300M in cuts at CBRE that will focus on headcount.

Duffy said Colliers has no plans to follow suit, though the company might decrease up to 5% through attrition.

“I’m not intending to downsize my headcount. However, if someone should resign, leave or otherwise vacate, we’re going to be pretty slow to backfill,” he said, adding that Colliers has never let anyone go during a downturn. 

One open position at Colliers, for example, is likely to remain unfilled until around the end of Q2 or Q3, Duffy said, corresponding to the time frame he expects things to pick back up for commercial real estate.

“In terms of sales, I think the first quarter is going to be exceptionally quiet as people readjust,” Duffy said. “Sellers are going to need to devalue their assets a little bit, and buyers are, I think, a little overly pessimistic right now.”


Activity will resume when interest rates start to moderate their climb and the industry begins sensing predictability and certainty rates are close to topping out, he said.

"Once everybody sees that we’re not going to go to 9% and 10% interest rates, hopefully, then the world will start moving again,” Duffy said.

About 75% of those surveyed said values will drop next year, and Duffy was in the 25.3% of respondents who said values will drop significantly. 

“I think if yield requirements are up and the cost of capital has gone up, what I can afford to pay for a property goes down,” Duffy said. “By significantly, I’m talking about 10% to maybe 15% or 20%. I don’t think it's 5%.” 

On the plus side, while it may not be the best time to sell or break ground, many expressed confidence the bad times won't last and said this could be the year to take advantage of lower property values and make acquisitions.

Multifamily topped what respondents think will be the smart-money bet for both acquisitions and developments next year at 27.8% and 30.9%, respectively. Industrial followed as the second-most chosen option in both categories.

When it comes to which regions will be hot, the Southeast, including South Florida, Atlanta and the Carolinas (50%) and Texas (39%) top the list, while the Midwest and the Pacific Northwest were each deemed target-rich environments for acquisitions and development by only about 10% of respondents.

John Filli, senior vice president at NAI Horizon in Phoenix, the fastest-growing U.S. large city, thinks Arizona is well set up in 2023 thanks to its population growth and ideal location for new development, including energy and manufacturing projects. Just over 24% of Bisnow readers agreed the Southwest is a good bet next year.

“The other types of industries that are coming in here, it’s not only the battery plants but the chip manufacturing companies,” Filli said. “Chips are an important component in production of any type of machinery, automobiles and anything else. World demand, it just has to happen, and this is a perfect place.”

A clear consensus was struck for what will be the worst bet for acquisitions next year: Office garnered 58.3% of responses. 

Jennifer Grant, an architect and founding partner of Quintessence Design Group in Denver, said Denver’s office vacancy rate hovering around 21% led her to choose that option.

However, there is opportunity in developing collaborative spaces for hybrid work rather than “big blocks of office space with cubicle farms,” Grant said.

“That is a thing of the past, in my opinion.”