The commercial real estate industry is always evolving and, now more than ever, it’s crucial to stay informed on the latest trends and insights. With his eye on the market, one Brad Zackson, founder of Dynamic Star, shares his real estate outlook. Below is the 2023 commercial real estate outlook and how it will affect investors and developers from his point of view.
Time to Invest in Technology
One of the biggest trends in commercial real estate for 2023 is the rise of “smart” buildings. Firms with flexibility and risk appetite can gain an advantage by investing in innovative technology that handles existing operations as they focus on core services. Investing in new technology such as the metaverse, smart contracts, and tokenization to manage existing services is futuristic. It also comes with the much-needed benefit of reducing costs when firms are trying to bounce back from the effects of the 2019 pandemic.
However, this year’s real estate outlook indicates most companies expect a cut or cap in their tech spending. This is in contrast to the 2022 real estate outlook, where two-thirds of companies were looking to increase spending towards investment in technology.
The Long-Term Talent Trend and Coworking Spaces
The effects of the pandemic on the real estate market include population relocation, the birth of remote-working options, and a rising wages environment. Understanding the shift in employee expectations can help commercial real estate leaders recruit and keep talented employees. Many real estate firms can enhance talent experience in the market by bolstering diversity, equity, and inclusion, as well as offering flexible schedules and career and skill development opportunities.
Coworking spaces have exploded in popularity with no signs of slowing down. With more people working remotely and freelancing, many firms are also looking to implement workplace redesigns to offer a flexible alternative to traditional office spaces.
Reassessing Firm Strategies for 2023
Revenue expectations for 2023 are mixed. Real estate leaders are unsure whether the industry is fully prepared to respond to uncertainties. However, many remain optimistic about the industry’s fundamentals. The factors expected to improve are tightening vacancies, leasing activity, and rental growth. These factors will influence the location of property type opportunities.
So where can you invest in 2023? The right location can make or break a property’s success. However, according to Brad Zackson’s 2023 commercial real estate outlook, downtown and suburban offices are the most attractive risk-adjusted properties. However, even in the next 12 to 18 months, urban areas will remain hotspots for commercial real estate.
The Regulation Environment for Commercial Real Estate Firms
At this point, most real estate firms are not prepared to meet new ESG regulatory requirements. However, commercial real estate leaders should strive to adopt practices that comply with the new reporting requirements as well as the trends in tax regulation. By increasing transparency in reporting and factoring in the tax implications of ESG initiatives, firms can benefit from tax benefits, such as tax credits.
The Bottom Line
So what does all this mean for investors and developers in the commercial real estate industry? According to Brad Zackson, by investing in technology and considering the changes in employee expectations, commercial real estate firms can stay ahead of the latest trends and adapt to changing market conditions.
