Commercial real estate industry professionals appear to be a little more optimistic about 2023 than U.S. business leaders as a whole, according to JPMorgan’s 2023 Business Leaders Outlook Survey for CRE. Nearly half of real estate leaders are optimistic about the U.S. economy in 2023, compared to 22 percent of U.S. business leaders.
The survey, taken between November 29 and December 13, 2022, comprised almost 800 respondents, about 150 of which said they worked in CRE. The CRE leaders who took part hold various assets but were concentrated in multi-family properties.
Approximately 75 percent of the CRE professionals surveyed said they expect increases in their revenue/sales and capital need compared to U.S. business leaders in general. Meanwhile, 44 percent of the real estate respondents said they are optimistic about the global economy and 46 percent felt similarly about the U.S. economy. About two-thirds of CRE leaders had a positive outlook about the industry’s performance in the coming year with 73 percent optimistic about their own company’s performance.
While CRE leaders are optimistic about their industry’s prospects in 2023, they were also realistic, according to the survey. Fifty-five percent of the respondents said they expect a recession this year (compared to 65 percent of U.S. business leaders).
In the event of an economic downturn, there was a split between what most CRE professionals’ next step would be — make strategic acquisitions and maintain a steady state both registered at 27 percent. The remainder of responses in the “economic downturn” category included optimize operations (23 percent), adjust rents (13 percent) and reposition assets (10 percent).
Respondents also remained concerned about interest rates — 67 percent of survey takers noted that rising interest rates/increased cost of capital are driving up business costs. Affordable housing shortages and supply chain issues also ranked high on CRE leaders’ growing concerns (both at 28 percent). Office CRE’s unclear future was another concern (18 percent), as were the speed of tech innovation (15 percent) and climate change (11 percent).
While most respondents (72 percent) said they were experiencing inflation challenges and rising costs; it wasn’t as many as JPMorgan’s entire U.S. sample — 91 percent. Despite the challenges, CRE companies said they don’t expect growth to be negatively impacted. More than half of the industry leaders said they plan to expand in new domestic markets.
Although CRE leaders had a more optimistic outlook about 2023 than the remainder of U.S. business leaders, JPMorgan’s U.S. 2023 Business Leaders Outlook revealed there’s still a lot of hope for a good year.
“But the news isn’t all doom and gloom,” JPMorgan said in its 2023 Business Leaders Outlook: US report. “Most leaders (66 percent) are still optimistic about their own company’s performance. Nearly 90 percent expect to add or keep employees. And supply chain challenges have eased somewhat: 39 percent said it has gotten easier over the past 12 months to source materials and ship goods.”