The 2023 CRE Outlook: CEOs Weigh In

Next year could get bumpy fast. These leading executives shared their insights during this CPEVoices discussion.

(excerpt)

Cooling trend

Nearly all participants welcomed recent signs of slowing inflation, though it remains at a 40-year high, even in the face of repeated interest rate hikes. Of note was how this affects the dealmaking landscape. Marcus & Millichap President & CEO Hessam Nadji welcomed the cooling trend as a “step in the right direction.” Still, Nadji voiced his concern about the possible lag effects, particularly regarding the recent interest rate hikes. “How much damage have they done that is not visible yet?” he asked.

Other participants saw the public markets’ quick adjustment to inflation and rising interest rates as another positive development. As John Gates, CEO of Americas markets at JLL, observed, “Everyone has realized that the increase in rates isn’t temporary… assets will reprice in this higher-yield environment.”

Nadji agreed, cautioning against rosy speculation. “I don’t see a scenario in the near term where rates are being lowered again and there is another round of stimulus… we need to come to terms with the fact that normalized rates are here to stay.”

Nonetheless, the combination of unknowns is having a pronounced effect on dealmaking and leasing. Camille Renshaw, co-founder & CEO of B+E doesn’t see the current interest rates as the peak. “None of us have crystal balls, and our clients don’t, in terms of timing,” she said.

Jonathan Martin, CEO of AEW Capital Management’s North America division, also attested to this trend, noting, “All of our clients are waiting for those adjustments to take place.”

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