2023 commercial real estate outlook

J.P. Morgan's 2023 outlook for commercial real estate is influenced by a range of macroeconomic factors. Key among these is the ongoing conflict in Ukraine and subsequent sanctions on Russia, which have pushed up the price of food, shelter, and energy. This is further compounded by record-high inflation rates of 7.75% in the US, which have increased residential rent costs, affecting both affordable and market rate housing. Interest rates are also rising, and the Federal Reserve predicts more increases into 2023, which may negatively affect commercial real estate owners. Multifamily owners and investors may benefit, however, as higher interest rates could make homeownership less attainable for some, leading to longer rental periods. These factors combined could result in a mild to moderate recession in 2023, with a more traditional economic slowdown likely to take years to recover from and affect all asset classes. The impact of the pandemic on the economy was similar to that of a natural disaster on a national scale, yet the economy recovered in just a few quarters. However, this predicted recession could lead to a longer-lasting and more impactful recession.