Source: MPA Mag —
High interest rates and a potential recession will make this year a challenging one for commercial real estate, an industry pundit said.
Richard Barkham, global chief economist for CBRE, predicts a recession for next year that will only exacerbate economic challenges: “High interest rates and a recession will make 2023 a challenging year for commercial real estate,” he said. “Though inflation eased in late 2022, it was still running at more than 7%. The Fed will continue raising rates until it sees a marked reduction in inflation nearer to its 2% target. Weakening fundamentals and higher cost of capital will generally lower asset values.”
Still, he doesn’t predict a deep recession for this year: “The recession will not be particularly deep. Corporate finances are in good shape and employers will shun excessive layoffs to avoid losing employees in a tight market for skilled labor. While consumer confidence is highly subdued, average household debt is low compared with the onset of previous recessions. These factors suggest a moderate downturn, with unemployment unlikely to breach the 6% level. Inflation will be significantly lower by the second half of 2023, setting the stage for falling interest rates and the beginning of a new cycle that will last to the 2030s.”
Pace of change won’t ease
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