CORFAC News

The impacts of inflation and rising interest rates have affected the majority of CORFAC International’s global member firms in the first half of 2023. Yet the industrial/manufacturing sector continues to fuel the pipeline for 88% of members and the office sector fueled transactions for 53% of members who responded to CORFAC’s Spring 2023 Business Impact Survey. 

Amid concerns about inflation, remote work trends and bank failures, members expressed a leveling of business activity compared to the latter half of 2022. Overall transaction volume increased for just 24% of respondents, remained neutral for 35% of respondents and decreased slightly for 35% of respondents. 

Recession concerns spiked in the first half of this year with more than 70% of respondents expressing greater worry about the effects of an impending recession than at the end of last year. Inflation, remote work trends and high costs for construction materials are the other top factors negatively affecting commercial real estate overall, according to members.

“Due to higher interest rates and concerns about a recession, investors are waiting on the sidelines for better times,” said one respondent. “Hybrid and remote work trends continue to shrink users’ space requirements and the impact of this will become more visible in the coming months.”

Bright Spots in a Challenging Market
A few bright spots the survey revealed are sources of new business, which include clients expanding, clients downsizing, new companies locating to the market and members receiving referrals from other CORFAC members. More than 35% of respondents received an inbound referral from another member, a positive indicator of the network’s value for business development in challenging conditions.

Positive dynamics affecting commercial real estate in the first half of the year include a strong job market and favorable hiring trends, return to work mandates by employers and improved delivery times for construction materials. 

Some markets are being impacted - both positively and negatively - due to company and facility relocations. “Florida is rapidly growing at the expense of other states due to climate, taxes and the regulatory environment,” said a respondent. On the West Coast, Nevada and Arizona are the beneficiaries of companies exiting California, said another respondent. 

On the positive side, “Interest rates have stabilized, tourism has returned and many workers have returned to their offices, though hybrid work policies appear to be the new norm,” a respondent remarked. 

Economic conditions are driving most CORFAC members’ clients’ decisions, with 81% of survey respondents saying availability of capital and interest rates are major factors affecting transaction activity. Local market factors such as availability of inventory, pricing and incentives are another major driver of client decisions.

With market sentiment cooling significantly in the first half of the year, the need for experienced local market expertise is more important than ever. Buyers and sellers alike will need help timing their business decisions to the inflation and interest rate curve, and CORFAC brokers can provide this valuable insight.