CRE Investor Optimism In 2023 May Be Linked To Taking Advantage Of Distressed Properties

Commercial real estate investors are cautiously optimistic, according to a recent survey from the real estate arm of global law firm Seyfarth Shaw LLP.

But that underlying optimism may be rooted in the belief by executives polled that other investors' woes may be their future opportunity.

The eighth annual Real Estate Market Sentiment Survey saw 69% declaring a positive outlook for commercial real estate investing in 2023, compared to last year’s 84%. Even with the decline in optimism from 2022, Seyfarth real estate partner James O’Brien told Benzinga that two-thirds of the commercial real estate executives polled that were optimistic proved to be the most surprising result of the annual poll. 

“They (the respondents) think we’re in a recession, yet they say we are in a year of opportunity. Trying to square that circle has perplexed me,” he said. “With all the headwinds investors face now, like high-interest rates and inflation, I would have thought the number would have been lower. But real estate investors tend to be an optimistic group.” 

The Seyfarth survey, which went out to 2,500 executives of the law firm’s commercial real estate clients, showed that part of their shared optimism was linked to anticipation of making deals on falling property values. Nearly half said they planned to invest in distressed assets this year. 

“They’re certainly looking at properties in foreclosure or ones that might be in pre-foreclosure with loans coming due where sellers are in a position where they’re forced to sell,” O’Brien said. “Certainly office properties. They’re facing too much debt and facing the inability to refinance.” 

O’Brien said he believes what also stood out in the survey was that the commercial real estate executives overwhelmingly believe that the economy is not only in the middle of a recession but are optimistically planning for a fairly quick conclusion to it.

“For sure, most aren’t waiting for a big recession looming but that we’re already in one now and that we may be seeing the other side of it in six to 12 months.”

Looking for a way to boost returns? Benzinga’s Real Estate Offering Screener has the latest private market investments with offerings available for both accredited and non-accredited investors. 

Start generating passive income through real estate

Check out these featured investments from Benzinga's Real Estate Offerings Screener.

Recently added:

• Missoula Marriott Portfolio: Two recently completed Marriott hotels with a 15.2% target IRR
• Castings Commerce Park: Industrial development with 22% target IRR