A recovery in the real estate capital markets is likely to begin around the middle of the year, with transaction activity becoming better supported over the course of 2023 as financial stresses start to ease, says Richard Barkham, CBRE’s global chief economist.
Speaking on the Nareit REIT Report podcast, Barkham said, “real estate capital markets tend to lead the economy, both on the downside and in the upturn…it’s going to take a while for investors to start to move because they want to assess the situation in terms of fundamentals. But we do see a capital markets recovery beginning around mid-year.”
Barkham said transaction activity is likely to become better supported over the course of the year as financial conditions improve, primarily in the second half of the year. However, “that's not to say there won't be activity in the first half of the year. There is a record amount of capital looking to deploy in real estate and looking for opportunities, particularly if pricing is a little bit more favorable.”
Sectors that will lead the recovery are the ones that have dominated the landscape for the last several years, Barkham said, with industrial remaining a key focus for investors. Multifamily, although “somewhat disrupted at the moment,” is also of continuing interest for investors, followed by retail. Office, apart from trophy assets, will be “a bit of a laggard in that pack,” he added.
Elsewhere, Barkham discussed the trends he is seeing regarding supply. As for the industrial sector, “we still feel that the supply and demand balance is reasonably positive and actually will support rental growth.”
In addition, Barkham said he believes the ability to convert the office sector or certain assets in the office sector into residential use “is a once in a generation opportunity.”