As we move into 2023, the real estate development and construction industry is poised for significant growth and innovation. As urbanization continues to drive demand for housing and commercial space, the industry is also adapting to changing needs and preferences of consumers.
According to the Construction Confidence Index by ABC, contractor morale continues to be positive as of November. Economist Zack Fritz reports that 60% of contractors plan to expand their workforce over the next six months, while only slightly over 10% anticipate staff reductions. Additionally, approximately 50% of contractors project sales growth, while around 20% predict a decline. FRED (Federal Reserve Economic Data) reveals a 19.5% YoY decrease in new privately owned housing units starting in the first two months of 2023. However, this decline is not necessarily negative news, as the upward trend in construction costs experienced in 2021 and early 2022 has reduced significantly. Developers were asked whether they observed any changes in deals repricing over the past three months. The results indicate that 47% of developers witnessed upward repricing, a decrease from 92% in March 2022; 21% reported downward repricing, while none did in March 2022; and 14% of developers noted no repricing, compared to 5% in March 2022.
When examining construction expenses, it can be noted that the cost of materials has declined from its high in early 2022. However, a significant decrease in construction costs is doubtful; rather, we should anticipate price pressure in 2023 and possibly 2024 before prices stabilize and begin to climb steadily. The recent turbulence amongst regional banks could increase uncertainty surrounding higher interest rates. This is likely to cause a shift towards a more onerous regulatory environment along with a tightening of loan availability. In many areas, the rate of rent rise has slowed or even reversed. Given the potential delivery of about a million additional rental homes, we anticipate this condition to continue until 2023. However, since there is still an imbalance between supply and demand, these new units will ultimately be consumed. Coupled with a decline in medium-term deliveries brought on by the current slowdown, rent growth will then resume in 2024 and carry on in the future.
Commercial construction is facing many headwinds during this time. Given the negative consequences of remote work, office development is anticipated to fall in 2023. The demand for physical stores is still being influenced by the rise of online purchasing. This, however, may not entirely be a bad thing. According to leading reports, the need for data centers, a subsegment of the office construction market, will continue to grow in 2023 as a result of increased online purchasing and home-based employment.
While recession remains a remote probability, experts believe that if it does occur, it will be moderate. While we see a rocky short-term prognosis, it may be just what is needed to strengthen fundamentals over the long term and retain the risk-adjusted returns that drive the multifamily investment strategy. All in all, there are still numerous opportunities for growth and to turn a profit in 2023 and 2024.
Navigating the Future of Real Estate: Trends in Houston and Beyond
Real Estate Articles / Jul 19, 2024
the real estate landscape is rapidly evolving, with online homebuying, smart home integration, and virtual interior design becoming increasingly prevalent.
Legal Victories Unleash Potential to Cut Property Taxes - Impact on Hospitality and more
Real Estate Articles / Nov 15, 2023
Landmark Court Decisions Pave the Way for Lower Property Taxes and Intangible Asset Considerations
Tesla moves to Texas - Impact on real estate and economy
Real Estate Articles / Jan 27, 2022
2021 was a big year for real estate in many ways, but the biggest news of the year came towards the end of it when billionaire magnate, Elon Musk announced his move from California to Texas.
Industrial development on the rise in Texas real estate 2023
Real Estate Articles / Apr 04, 2023
Texas has become a place of choice for businesses because of its growing population. This growth has led to increased demand for commercial real estate development, specifically industrial development. This rise is set to continue until the end of 23
Shopper & Consumer Trends Are Causing This Movement In Retail Real Estate
Real Estate Articles / Jun 19, 2023
The post-pandemic era brought several changes to the real estate market, specifically retail real estate and retail investment. Market trends for retail investment are on the rise. This is the right time to invest in real estate.
Navigating the Changing Tides of Net Lease Investments
Real Estate Articles / Jul 01, 2024
Net lease property market adjusts to rising interest rates: Sales volume down, cap rates up. Financing challenges stymie development and acquisitions.
This Is How Multifamily Real Estate Can Help The Retail Sector
Real Estate Articles / Jan 31, 2023
Having a multifamily property in a retail center is beneficial for both the buyer and seller and the residents of the property. The demand for rental communities that offer combined spaces for living, working, and entertainment is on the rise.
What You Need To Know About Closing
Real Estate Articles / May 11, 2022
Whether you are buying property or selling property, closing is a crucial part that will make or break your deal. We have listed major pointers that will help you deal with your next closing much better.
Is Your Investment Property Maximizing It's Returns Potentials
Real Estate Articles / Feb 23, 2019
Are you leaving money on the table? When it comes to your investment property you need to be earning maximum returns. After all, you aren\'t in this to give away money, am I right?
Late 2022, Early 2023 Market Trends
Real Estate Articles / Dec 05, 2022
Real estate investors are keen to invest in real estate. End of year real estate trends and market predictions and trends that can be expected in commercial real estate for 2023.
