As we say goodbye to 2022 and move into the New Year, it’s important to look at the trends facing commercial real estate. In bigger cities, if you look around it appears that companies are always building something new. While that currently does hold true, the economic struggles of 2022 have slowed things down.

 

Challenges to Account For: Difficulty Borrowing Money, Labor Shortage, Supply Chain

Beginning with challenges that lie ahead, the Fed continues to raise interest rates. The latest increase by the Federal Reserve in December 2022 of 0.50 percentage points places an increasing strain on companies and individuals post-Covid. Raising the interest rates over the past year has slowed the commercial real estate industry by making it more difficult to borrow money, more difficult to maintain occupancy, and more difficult to sustain growth overall.

Another challenge of the current recession is continued labor shortages. A recent article on LinkedIn “Why is Hiring So Hard Right Now?” suggests that job seekers “don’t have time for the hiring process,” which actually points to a bigger issue that no one seems to address. Job seekers, already strapped for cash, don’t have time or money to patiently wait out the hiring process that many companies use. Employee retention does not always seem to be a priority among employers, which encourages turnover.

Supply chain issues continue to make commercial construction a challenge. According to Construction Dive, some material sectors are returning to normal production after Covid, while others may face challenges for a long time. Uncertainty in the materials industry will require longer lead times in construction. In addition, higher cost of goods is driving up the cost of construction.

 

Potential Areas of Growth

The industrial and warehouse space continues to see growth as businesses focus on online sales. Another area of growth is multifamily properties. According to JPmorgan, the need for affordable housing is keeping vacancies across multifamily housing at a record low of 4.4%.

If you are currently in the commercial real estate market as an entrepreneur or investor, you have likely experienced some of the hills and valleys. There is always reason to be optimistic and plan ahead for the future. As investment specialists at Weaver Realty, we closely follow the market to assist our clients in making strategic decisions for the future. We study the Florida market closely and work hard to assist clients deciding when to make a move.  Call us today at 904-733-0039 to find out how our investment expertise can enable you to make confident and smart decisions in today’s economy.