The "vastly higher" interest rate environment coupled with the possibility of additional rate increases, inflation, and a potential recession is wreaking havoc on developers and investors.
Nonetheless, by focusing on fundamentals, more than a majority (69 percent) hold an optimistic view about 2023, according to Seyfarth's 8th Annual Real Estate Market Sentiment Survey.
That figure is below the 84 percent of CRE executives who believed 2022 would be a year of opportunity, according to Seyfarth. Still, not bad given "the uncertainty of a recession, material office vacancy, retail bankruptcies, and multiple efforts to adopt some form of residential rent control," according to the report.
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Today's resilient optimism flows in part from better-than-expected economic growth during the fourth quarter of last year and a continued inflation rate decline.
"It too may reflect a move to invest in distressed assets," Seyfarth said.
Respondents' feelings that a recession is here or is forthcoming were mixed.
Meanwhile, 48 percent of all respondents said they plan to invest in distressed assets in 2023, and nearly 60 percent of those who view 2023 as a year of opportunity also plan to invest in distressed assets.
The survey indicated that work-from-home/hybrid models among the employed are now "table stakes" when attracting top talent. About two-thirds (62 percent), however, said it is resulting in a decline in company culture.
Many of the executives who responded said they expect private equity to become the leading source of equity in 2023 and nearly three-quarters anticipate a continued preference for urban market investments.
Multifamily and industrial assets are the preferred core property types.
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