Commercial real estate professionals are slightly more optimistic about the year ahead than U.S. leaders overall, according to our 2023 Business Leaders Outlook survey.
The commercial real estate leaders surveyed hold various assets, with a concentration in multifamily. Nearly three quarters of these professionals expect increases in their revenue/sales and capital needs (both at 71%)—significantly higher rates than U.S. business leaders in general. Almost half of real estate leaders are optimistic about the global (44%) and national economy (46%). Nearly two-thirds (65%) are also optimistic about the industry’s performance in 2023, with 73% optimistic about their own company’s performance.
Leaders still anticipate challenges ahead—55% expect a recession in 2023. If an economic downturn occurs, real estate professionals were evenly divided on their first action: making strategic acquisitions (27%) or maintaining a steady state (27%).
Interest rates remain a prominent issue; 67% of respondents said rising interest rates/increased cost of capital are driving up business costs. Aside from the rate environment, leaders said the most pressing concerns facing the industry are lack of affordable housing (28%) and supply chain issues (28%).
Most respondents are also experiencing inflation challenges and rising costs (72%) but at a lesser degree than the total U.S. sample (91%). These challenges, however, may not hinder their growth; more than half of leaders plan to expand into new domestic markets.
About the survey
Started in 2011, the annual and midyear Business Leaders Outlook survey series provides snapshots of the challenges and opportunities facing executives of midsize companies in the United States.
This year, 791 respondents completed the online survey between Nov. 29 and Dec. 13, 2022. Of those respondents, 157 self-identified as working in commercial real estate. The 2023 survey captures those responses for the inaugural Business Leaders Outlook: Commercial Real Estate.
Results are within statistical parameters for validity; the error rate is plus or minus 7.9% at the 95% confidence interval.
Economic outlook for 2023*
Global economy: Optimistic 44%; Neutral 17%; Pessimistic 39%
National economy: Optimistic 46%; Neutral 22%; Pessimistic 31%
Local economy: Optimistic 55%; Neutral 24%; Pessimistic 20%
Industry performance: Optimistic 65%; Neutral 14%; Pessimistic 21%
Company performance: Optimistic 73%; Neutral 20%; Pessimistic 6%
*Among respondents who indicated they work in commercial real estate.
National and global optimism
Optimism on national economy
U.S. commercial real estate leaders 46%
U.S. business leaders in general 22%
Optimism on global economy
U.S. commercial real estate leaders 44%
U.S. business leaders in general 8%
Pending recession
U.S. commercial real estate leaders: Yes 55%; No 36%; Not sure 10%
U.S. business leaders in general: Yes 65%; No 16%; Not sure 18%
Most likely business response to an economic downturn*
Make strategic acquisitions: 27%;
Maintain a steady state: 27%;
Optimize operations: 23%;
Adjust rents: 13%;
Reposition assets: 10%
*Among respondents who indicated they work in commercial real estate.
Bullish on their own businesses
Nearly two-thirds of real estate leaders expect their profits to increase in 2023. Most expect their capital needs to increase as well.
Business expectations*
Profits: Increase: 65%; Remain the same: 18%; Decrease: 17%
Capital needs: Increase: 71%; Remain the same: 22%; Decrease: 6%
*Among respondents who indicated they work in commercial real estate.
Inflation challenges
Inflation is increasing business costs. The majority of commercial real estate leaders are passing those expenses onto consumers.
What’s driving up the cost of doing business*
Rising interest rates/increased cost of capital: 67%;
Increased cost of energy: 67%;
Increased costs of retaining/hiring employees: 65%;
Increased costs related to supply chain issues: 63%;
Increased costs of raw materials: 59%
*Among commercial real estate respondents who indicated they are experiencing inflation challenges/costs rising.
Percentage of increased costs passed onto consumers/buyers*
Up to 25%: 21%;
26%–50%: 19%;
51%–75%: 24%;
76%–99%: 6%;
100%: 7%;
None: 23%
*Among commercial real estate respondents who indicated they are experiencing inflation challenges/costs rising.
Business challenges
Leaders in real estate face a litany of challenges, including rising interest rates, supply chain issues and cyberattacks.
Top external business threats*
Cost of debt/interest rates/access to capital: 34%
Energy prices: 11%
Cybersecurity and fraud concerns: 10%
China and trade/policy concerns : 10%
General market volatility: 10%
*Among respondents who indicated they work in commercial real estate.
Top issues facing the commercial real estate industry*
Lack of affordable housing: 28%
Supply chain issues: 28%
Unclear future of office: 18%
Speed of technology innovation: 15%
Climate change: 11%
*Among respondents who indicated they work in commercial real estate.
Cyberattacks experienced in last six months*
Not directly impacted: 34%
Payments fraud: 33%
Business email compromise: 29%
Malware (including ransomware): 28%
Crashing of company’s online service or site: 27%
*Among respondents who indicated they work in commercial real estate.
Business growth plans
More than half of leaders are planning to expand into new domestic markets. More than a third count strategic partners/investments, new products/services and new distribution channels among their growth strategies.
Growth strategies for the next 12 months*
Expand into new domestic markets: 54%
Strategic partnerships/investments: 37%
Introduce new products/services: 36%
Expand into new distribution channels: 31%
Focus on most profitable products: 29%
*Among respondents who indicated they work in commercial real estate.
Corporate responsibility
Top areas of focus within corporate responsibility*
45% Diversity, equity and inclusion; 43% Governance; 41% Social
*Among respondents who indicated they work in commercial real estate.
Election effects
From the regulatory environment to infrastructure, most real estate leaders feel the same or better about key issues after the midterm elections.
Sentiment following the 2022 elections*
Regulatory environment: Worse 29%; Same 39%, Better 32%
Corporate taxes : Worse 27%; Same 39%, Better 33%
Infrastructure: Worse 15%; Same 46%, Better 39%
*Among respondents who indicated they work in commercial real estate.
Survey demographics
Who took the survey*
Chief Financial Officer: 34%
Owner/founder: 26%
CEO/chairperson: 24%
Other: 17%
*Among respondents who indicated they work in commercial real estate.
Assets owned/managed*
Multifamily: 71%
Office: 53%
Industrial: 52%
Mixed use: 49%
Affordable housing: 46%
Community impact developments: 32%
Retail: 24%
*Among respondents who indicated they work in commercial real estate.
Company size by number of employees*
1–49: 22%
50–99: 11%
100–249: 24%
250–499: 12%
500–999: 24%
1,000–4,999: 8%
*Among respondents who indicated they work in commercial real estate.
Company size by annual revenue*
Under $20mm: 15%
$20mm-$100mm: 39%
$101mm-$499mm: 43%
$500mm+: 3%
*Among respondents who indicated they work in commercial real estate.
Note: Some numbers may not equal 100% due to rounding.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/cb-disclaimer for disclosures and disclaimers related to this content.
