Data & Research

CBRE’s 2023 US Real Estate Outlook: Moderate Recession Will Slow Leasing and Investment, But Opportunities Are Emerging

December 16, 2022

– CBRE foresees a moderate recession in 2023 that will bring declines in real estate investment and leasing activity, though inflation will recede by year end and well-capitalized investors still will be able to make deals, according to the company’s 2023 U.S. Real Estate Outlook.

CBRE anticipates recession-related trends in 2023 such as declining home prices and retail sales as well as rising unemployment. Even so, the recession likely will be moderate, given that corporate balance sheets are relatively strong, household debt is relatively low and inflation is expected to ease.

For commercial real estate, CBRE forecasts a slowdown in construction in most sectors in addition to declines in asset values, investment volume and leasing activity. Each sector will see different outcomes, including a widening of the gap between top-tier and lower-tier assets in the office sector, slower leasing momentum in the once-surging industrial & logistics and life sciences sectors and a continued resurgence of retail properties. Construction cost increases are expected to recede to 5.4% after two years of double-digit gains.

“Most areas of the U.S. economy are not as overextended as in past downturns,” said Richard Barkham, CBRE’s Global Chief Economist and Global Head of Research. “Next year won’t be pleasant, but neither will it be a disaster like the Global Financial Crisis. The economy will stabilize and start to improve in 2024. The recovery from there might surprise on the upside.”

CBRE’s report details the company’s 2023 outlook for multiple sectors.

Capital Markets:

CBRE sees capitalization rates – a measure of a property’s value in relation to its cash flow – increasing by 25 to 50 basis points next year. That will translate to an average 5% to 7% decline in asset values in 2023 following the 10% to 15% decline in the first three quarters of this year. Investment volume is expected to decline by 15% from 2022 levels, though that still would exceed the pre-pandemic 2019 total.

Financing properties and transactions in 2023 will be challenging, but debt capital will be accessible for strong properties and high-credit borrowers.

Office and Occupier:

Employees’ office-use rates aren’t likely to meet companies’ expectations in 2023. CBRE’s Econometric Advisors unit forecasts that the long-term increase in remote work will result in up to 15% less office use on a per-employee basis going forward. Companies optimizing their office portfolios to fit new patterns of use are likely to favor consolidating into high-quality space, benefitting owners of top-tier office buildings.

Projected construction completions for 2023 are 27% below the five-year average. Some distress will emerge as lower-grade office assets fail to secure refinancing.

Industrial & Logistics:

Leasing activity in the previously white-hot sector will decline by 10% to 15% in 2023 and construction starts will decrease. However, due to the growth of the digital economy, the sector’s leasing activity still will generate a 13th consecutive year of positive net absorption. The sector’s historically tight vacancy rate will increase by 30 to 60 bps, though it will remain below its 10-year average.


A decade or more of constrained construction and a healthy consumer sector has substantially strengthened retail sector fundamentals, leading to a 10-year low in availability. Most construction activity in the sector now focuses on enhancing existing properties rather than building ground-up projects. In stores, staffing is an issue, but retailers are increasingly using technology for tasks such as inventory counting and touchless checkout.


Elevated construction completions will push apartment vacancy up slightly in 2023, but the rate will remain below its 20-year average of 5%. CBRE forecasts apartment rents increasing by 4%. Cap rates for multifamily properties increased by at least 75 to 100 bps this year, and CBRE anticipates additional increases in 2023.

Data Centers:

Limited availability of land and power supply will affect new construction in 2023, challenging the sector’s rapid growth rate. Data center operators will increasingly consider secondary or tertiary markets for expansion. Operators are set to deploy new cooling technologies to help curtail their water use as sustainability remains a priority.

Life Sciences:

Tighter financial conditions and reduced availability of venture capital will moderate the life sciences sector’s growth, leading to more options for companies seeking lab space in tight markets. Industry partnerships and acquisitions will keep sector momentum up. The decline in venture capital financing from 2022 levels will be offset somewhat by federal funding, such as from the National Institutes of Health.


CBRE foresees revenue per additional room – RevPAR – increasing by 5.8% in 2023, which is a slowdown from this year’s 29% RevPAR gain. Factors fueling growth will be the continued easing of travel restrictions, particularly in Asia, increased demand for group travel, a modest uptick in corporate transient demand, and a lapping of first quarter 2022 figures hampered by the Omicron variant. CBRE expects a more modest volume of hotel transactions due to higher utility, insurance, labor and property costs and higher interest rates.

Carbon Emissions:

More state and local governments will enact guidelines aimed at meeting the U.S. goal of reducing carbon emissions by at least half by 2030. That means companies have to adopt and follow building level environmental performance standards in order to do business.

To read the full report, click here.

Related Articles

Back to top button