2023 in Commercial Real Estate, Part One: Housing

Here is what you really need to know about US Commercial Real Estate in 2023. Part One will start with CRE for housing (multi-family and mixed-use). Part Two will take a look at what we can expect in non-housing CRE in 2023. In each case, a single regional profile is included, presenting areas where CRE of one or many types is expected to boom this year.

Quick Facts on the Multifamily Housing Market

• The US multifamily sector as a whole is projected to perform “above average” in 2023 despite economic headwinds and ongoing capital market disruptions. Strong housing fundamentals should keep US average occupancy rates generally above 95% and drive 4% annual rent growth.

• Elevated construction completions are expected to push apartment vacancy up slightly in 2023, but the rate, again, is expected to remain below the 20-year average of 5%.

• CBRE forecasts average apartment rent in 2023 increasing by ~ 4%. Cap rates for multifamily properties increased by ~ 75 to 100 bps in 2022, and CBRE anticipates additional increases in 2023.

• With the for-sale market already supply-constrained, it is projected that nearly 5 million new US market-rate multifamily units will be needed in the US by 2035 to keep pace with demand. In the near term, however, as households grapple with the remnants of economic uncertainty, new renter demand may struggle to keep pace with supply.