Forbes expects real estate transactions to continue to increase in 2023 as the economy recovers. Commercial real estate prices are expected to continue to grow at an average, and REIT mergers and acquisitions may also increase relative to 2021
In 2022, commercial housing markets bounced back. Trading volumes increased 64% in the first 10 months of 2022 over 2021. Purchases of industrial and multi-family homes were up 30 percent from pre-pandemic levels in 2020.
Despite this delay, retail and office prices increased, albeit at a slow pace. They are showing signs of recovery following the declines they experienced at the onset of the pandemic. Investors continue to be interested in industrial assets and multi-family dwellings because of the high demand for these spaces from prospective tenants. Limited opportunities and strong investor demand have pushed some investors to other types of properties, such as life sciences, data centers, self-storage, student and seniors’ accommodation, and hotels. The country's REITs and private equity firms have also moved more quickly to adopt these alternative sectors, which also includes a surge in demand for doctors' offices.
Amendments to environmental due diligence.
The climate emergency is affecting the way businesses operate, including private equity companies and REITs. Some tenants in their leased buildings have come to expect environmental, social, and governance (ESG) requirements.
For some private equity firms, ratings are becoming an important part of their strategy as they are competitive when it comes to acquiring and managing assets. Some companies have even begun to assess the climate risk of their portfolios with the help of climate risk analysis consultants and climate risk software firms.
This risk is now considered in their investment decisions, but the adoption of these industry-wide measures is hampered by the absence of standardization.
Enterprises, including private equity companies and REITs, can benefit from a holistic approach and the creation of a solid global strategy to create sustainable benefits and value while considering standards.
For example, some tenants have started to consider their properties as extensions of their brand. This makes newer, more energy-efficient buildings more appealing to prospective renters.
In addition, changes have been made to the standardized scope of work for Phase I Environmental Site Assessments, which will come into effect on January 2, 2023.
Commercial real estate may increasingly become a customer-oriented business.
Many renters are now looking to technologies such as online platforms to improve their user experience. In addition, some companies are already using technology to improve their understanding and management of their properties. The pandemic continues to drive tech uptake across the sector. It can be advantageous for REITs and private equity firms that use it, as well as for tenants who lease properties.
From a property management perspective, it is possible to automate energy, HVAC, ventilation, and air filtration systems.
This lowers costs and promotes healthy indoor environments that more and more renters are looking for in their homes and workspaces. Property managers measure the success of this technology by finding cost savings for renters and investors in commercial properties.
From an investment perspective, a new generation of data analytics looks promising, allowing businesses to use AI to proactively identify opportunities instead of screening individual transactions. As this artificial intelligence technology becomes more widely available, data analytics as a technology industry can expand and improve over the course of the year.
The pandemic has demonstrated that quarterly, if not monthly, data is often too infrequent to capture market developments. Artificial intelligence can help investment companies better visualize market trends.
The pandemic will continue to affect different sectors of the housing market, particularly in the event of surges or sudden changes. Despite this, the economic outlook for the commercial real estate industry remains largely positive because everyone is adapting to the new way of life. With the pandemic entering an endemic phase, demand for commercial properties is likely to increase.
Traditional and retail office space continues to grow slowly, but as they adapt, their recovery could accelerate. Adaptable business and employer strategies are expected to result in improvements in these areas.
Multi-family real estate continues to be an attractive investment for private equity companies, REITs, and private investors. Forecasted demand for accommodation could result in higher occupancy rates than pre-pandemic and increased use of technology will benefit property management.
The easing of travel restrictions also promises a continued recovery in the hospitality industry. Although leisure travel has contributed significantly to the economic recovery of these properties, business travel is expected to join the effort and drive occupancy rates nationally. Hotels also concentrate on building their reputation as safe and clean spaces to lead more customers to their properties.
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