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.
Stocks Or Real Estate? Which Is The Better Investment?
Real Estate Articles / Feb 09, 2022
Want to invest and make money? We have listed out the pros and cons of the real estate market and the stock market so that you can decide if you want to invest in stocks or real estate.
What REIT Means And How You Can Make Big Bucks With It!
Real Estate Articles / Feb 01, 2022
What if you were told that you could earn regular dividends from your investments without the hassles relating to buying, managing or even financing a property?
Short term rentals are declining but you can still make money with the right kind of investment
Real Estate Articles / Jul 26, 2023
There are still opportunities to earn money from short-term rentals, despite the ongoing decline. strategic investments and a proactive approach can lead to success in the evolving short-term rental industry.
Extending a Warm Welcome to Savings for All Property OWNER
Real Estate Articles / Oct 27, 2023
Texas\' Landmark Property Tax Reform: Securing Affordable and Sustainable Homeownership for Texans, Envisioning Average Yearly Savings of $1,300.
Houston is the best real estate market for industrial spaces in the country as of 2023
Real Estate Articles / Jul 25, 2023
Houston\'s industrial market has experienced impressive activity and has been recognized as the nation\'s top industrial market 2023.
Not All Industrial Real Estate Is The Same
Real Estate Articles / Jun 25, 2023
Industrial real estate includes manufacturing, logistics, and flex or R&D buildings. Find out which of these real estate investments is the most profitable for you.
Why Grocery-Anchored Real Estate Does Better!
Real Estate Articles / Feb 22, 2023
Grocery-anchored shopping centers are on the rise in the retail sector. They are the best investment in commercial real estate. It is low risk and long term.
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
Navigating the Future of Real Estate: Trends in Houston and Beyond
Real Estate Articles / Apr 01, 2024
Exploring Real Estate Trends in Houston: Embracing Online Innovations and Smart Home Features
Where To Find Real Estate Investment Opportunities In The Current Market
Real Estate Articles / Mar 23, 2019
Commercial Real estate investors, looking to maximize profits have set their sights on Texas. The Lone Star State has made a name for its self as a strong market for Commercial Real Estate Investors.
