Commercial real estate outlook

Q2 2023 Commercial real estate outlook: A dense fog

The correction in U.S. commercial real estate continues, with ultra-low interest rates and abundant liquidity coming to an abrupt end. The market now must come to grips with a world in which capital is more expensive.

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April 13, 2023 | 15 minute read

The U.S. commercial real estate (CRE) market is one of several asset classes that is seeing the backdrop of the past decade—characterized by ultra-low interest rates and abundant liquidity—come to a shockingly abrupt end. An environment of reliably cheap financing and valuation tailwinds has been replaced by one in which capital is costlier and cash flow reigns supreme.


Q2 2023 Commercial real estate outlook: A dense fog

Key takeaways

  • CRE property prices declined in Q1, and likely have further to fall.
  • Fundamentals are largely strong across asset classes, with Office being a clear outlier.
  • Power has shifted from borrowers to lenders, who are in position to drive attractive terms.

The correction in U.S. commercial real estate has continued apace to begin 2023, as the market comes to grips with a world in which capital is more expensive. In last quarter’s outlook, we expressed a belief that activity in the CRE market would remain subdued through Q1, and that was certainly the case. Sales volumes for January and February totaled $47 billion, the weakest opening two months since 2012. The downturn in activity is broad-based across the various CRE sectors, with retail the only area of the market where volumes are not down at least -50% year-over-year.1

  • MSCI Real Capital Analytics, as of February 28, 2023.

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Andrew Korz, CFA

Executive Director, Investment Research

Christopher Bole

Financial Writer, Fund Communications

Robert Hoffman, CFA

Managing Director, Credit Wealth Solutions

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