Cherif Medawar

Top Markets for Commercial Real Estate Investment in 2023

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High interest rates and a recession will make 2023 a challenging year for some asset classes in commercial real estate. 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.

The silver lining is that some asset classes in the commercial real estate market are poised for a significant rebound in 2023. The U.S. economy continues to grow and will continue to drive demand for commercial real estate in the coming years. Multifamily, Industrial and Flex, Modular Home Communities and some sectors of Retail are rebounding today. [March 2023] 

Commercial real estate investment is a major source of wealth for many investors. There are numerous markets around the world that offer opportunities for investors to make good returns on their money.

Commercial real estate is a prime investment market, with capital flowing in and out of the industry on a regular basis. The U.S. commercial real estate market has seen $1 trillion in capital invested over the last decade, with another $1 trillion expected to be invested over the next 10 years.

As investors continue to take notice of the benefits associated with commercial real estate investments, they are looking for areas that offer the best returns on their investments.

The commercial real estate market is a large and diverse industry. From office buildings to warehouses, hotels to shopping malls, residential apartments to mixed-use developments, the commercial real estate sector has something for everyone.

Factors That Can Impact the Performance of an Investment

Commercial real estate investment is an important part of many people’s portfolios. However, a number of factors can affect the performance of your investments, including:

Market conditions:  The economy is currently in a recession, so commercial properties will be easier to find than in previous years. However, when buying property at a discount price, you might pay more than you would have if you waited until the market rebounded.

Interest rates: Interest rates are an important factor when it comes to buying or selling a property because they determine how much money an investor will earn on their investment. Higher interest rates mean higher returns and vice versa.

Supply and demand: The balance of supply and demand in the commercial real estate market can greatly impact the performance of investments. Oversupply can lead to lower rents and decreased property values, while high demand can lead to increased rents and higher property values.

Government regulations: Changes in government regulations, such as zoning laws, tax policies, and environmental regulations, can have a significant impact on the performance of commercial real estate investments.

Market trends: The commercial real estate market is constantly evolving, and it’s important to stay informed about market trends and changes. Trends such as the shift towards remote work, changes in consumer spending habits, and advancements in technology can all impact the performance of commercial real estate investments.

The Top 10 Hottest Cities for Commercial Real Estate Investment in 2023

The commercial real estate market is constantly evolving, and choosing the right location for investment can make all the difference. With the right combination of economic growth, job market strength, and real estate demand, certain cities are poised to be top markets for commercial real estate investment in 2023.

  1. New York City, NY: New York City has always been a prime location for commercial real estate investment. Its robust job market and strong demand for office, retail, and hotel properties make it a top market for 2023. Despite its high prices, investors are attracted to the city’s steady flow of income from commercial properties.
  2. San Francisco, CA: San Francisco’s thriving tech industry is driving demand for office space, making it a prime location for commercial real estate investment. The city’s limited supply of available real estate, combined with its high cost of living, has driven prices up, making it an attractive market for commercial property investors.
  3. Washington D.C.: The nation’s capital is experiencing steady job growth and has a strong demand for office space, making it an attractive commercial real estate investment market. With a steady flow of government and lobbying spending, investors can expect a steady return on their investment.
  4. Boston, MA: The Boston metro area has become one of the hottest real estate markets in the country. The region is home to many Fortune 500 companies and a number of startups, which together have pushed commercial property values higher. The city also has one of the country’s most robust education systems, which means there are plenty of skilled workers to fill open jobs. As a result, Boston is expected to see commercial property values rise by more than 5% in 2023.
  5. Los Angeles, CA: The Los Angeles metropolitan area is one of the largest in the United States, with over 13 million people. The city is also home to some of the nation’s top attractions, including Hollywood and Beverly Hills. The area’s business climate is dominated by entertainment, media and international trade.

Los Angeles has been an up-and-coming city for real estate investors in recent years, and it’s expected to remain a hot market in 2023. 

     6.Dallas-Fort Worth, TX: The Dallas-Fort Worth metroplex, the nation’s fourth largest, has experienced a          population boom in recent years. The number of residents has increased by more than 7 percent since            2010 and is projected to grow by another 10 percent over the next decade.

The city is home to some of the country’s biggest employers, including Exxon Mobil Corp., AT&T Inc., American Airlines Group Inc. and Southwest Airlines Co., all of which employ thousands of people in the region.

     7.Seattle, WA: Seattle is the fastest growing city in the U.S., according to data from the U.S. Census                    Bureau. The city has added more than 50,000 residents since 2010 and is expected to continue its                    growth through 2023.

The city’s commercial real estate market is also flourishing, with more than $1.9 billion worth of commercial real estate transactions taking place in 2019 alone. With a population of over 700,000 people and an average annual salary of $74K, Seattle is an attractive option for both residential and commercial investors alike.

       8. Denver, CO: Denver has been one of the hottest real estate markets over the past several years, with              plenty of growth ahead. The city’s economy is fueled by several industries including aerospace,                        manufacturing and transportation. The office market has been especially vibrant with a vacancy rate                  below 10 percent and average asking rents above $30 per square foot. There are over 2 million SF of                new construction underway in downtown Denver, which will bring more than 14,000 jobs to the area                over the next few years. The city also has great access to public transit and has been named one of                  America’s most bike-friendly cities by Bicycling Magazine. 

      9. Austin, TX: The city has experienced strong job growth in recent years, driven by its thriving tech industry, leading to a growing population and increased demand for commercial real estate. Austin is also known for its vibrant culture, outdoor recreational opportunities, and thriving food and music scenes, which make it a desirable destination for both businesses and residents. With a relatively low cost of living compared to other tech hubs like San Francisco and New York, Austin is an attractive option for commercial real estate investment.

        10. Miami, FL: Miami’s growing population, thriving tourism industry, and strong economic growth make it a top destination for commercial real estate investors. The city is home to a variety of industries, including finance, technology, and healthcare, which are fueling job growth and driving demand for commercial real estate. Additionally, Miami’s prime location on the water, cultural diversity, and year-round warm weather make it an attractive destination for both businesses and residents. With a strong outlook for the future, Miami is an excellent opportunity for commercial real estate investment in 2023.

Bottom Line

While these cities are expected to be top markets for commercial real estate investment in 2023, it’s important to conduct thorough research and analysis before making an investment decision. Know how to analyze your numbers. Market conditions can change quickly, and staying informed and up-to-date on local real estate trends is essential.

There will be many opportunities in 2023 for people to break into commercial real estate. But there will also be challenges. Know how to FIND, ANANYLE, CONTROL, TIME & STRUCTURE the deals. BLUE OCEAN OPPORTUNITIES IN COMMERCIAL REAL ESTATE. Get Your Free Copy.

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