Opportunities & Challenges For Commercial Real Estate In 2023

The 2023 commercial real estate outlook highlights the significant changes in the industry, with a focus on San Francisco and New York City. San Francisco has seen a rise in office vacancies, with the vacancy rate increasing from 6% pre-pandemic to 15% in 2022. The increased office vacancies have resulted in a 13% decline in property prices from the 2022 peak, with office prices dropping by 17.5%. The trend is expected to continue, with prices dropping by 20-30% in the future. The reduced demand for office space is due to employees spending 25-35% less time in the office today than before the pandemic, which translates to a 15% reduction in office space demand per employee. Additionally, the market is facing the reality that cheap money is gone, with an estimated $450 billion of loans coming due in each of the next four years.

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Source: Valuewalk