The Real Estate Investment Outlook: What 2023 Has in Store
In a momentous time for every industry around the world, commercial and residential real estate have felt the disruptions of the past few years particularly acutely. The very way we exist as a society — from where we live and work to where we travel, shop, and socialize — has been put under the collective microscope. The real estate industry has been forced to rise to the occasion and found innovative ways to reinvent itself to meet the evolving demands of today’s consumers.
As we close out 2022 and move into what is sure to be another eventful new year, we’d like to take a look ahead into the transformative real estate outlook for 2023.
What Does 2023 Hold for the Real Estate Investment Landscape?
A (cautious) cause for optimism: As we’ve reported before: Real estate investors have solid reasons to feel optimistic going into the new year. The overall economy remains for the most part sound, particularly when compared to the Great Recession of 2008. In more good news: Inflation appears to be cooling, especially when it comes to housing costs. The rapid rise of housing prices has slowed recently, and in many markets, so have rental rate hikes, hinting that the shelter index will drop in the near future, thus taking further pressure off the overall rate of inflation.
The triumphant return to travel: Not surprising is the success of hospitality projects in the wake of the global pandemic. What is remarkable, however, is the record-breaking year the hotel sector had in 2022. Revenue per available room and average daily rates for hotels nationwide have surpassed pre-pandemic records, propelling the sector to an improbably strong year. Hotel construction is enjoying growth at a satisfying clip, with Lodging Econometrics projecting 733 hotels with 87,253 rooms expected to open in 2023, representing a 1.5 percent increase in new supply. Looking even further ahead, LE's analysts expect 848 hotels with 93,581 rooms to open in 2024 for a 1.6 percent new supply increase.
The rise of REITs: According to the Association of Real Estate Funds index, many real estate investment funds have outpaced inflation. Real estate funds come in all shapes and sizes, allowing for collective investment from numerous investors, which are pooled together to purchase real estate assets, most commonly residential and commercial real estate. REITs have proven to be safe havens in these tumultuous times, in particular lodging/resort and retail (driven by the steadfastness of regional malls) REITS have performed unexpectedly well in 2022 and moving ahead into 2023. The propensity of PropTech: The real estate industry, because of or perhaps despite its global scale and massive wealth generation, has been historically slow to adopt new technologies. This past year changed all that, and 2023 is poised to see the PropTech movement take an even stronger hold. Encompassing everything from property search platforms and property management tools to construction planning, evaluation and financing, and asset utilization insights, such innovations streamline real estate initiatives and equip real estate investors with accurate market research, proper planning, and enhanced networking capabilities to secure the right deal with the best partners.
Fortune Favors the Bold
As an organization, we’re encouraged and excited for the future of the real estate investing outlook and the numerous positive changes and opportunities that have developed as a result of a rapidly transforming industry.
The Capital Connect team would like to wish you a happy, healthy, and rewarding new year. We look forward to working with you in 2023 and beyond to support all of your real estate networking and investing initiatives and relationships.