2023 Winter Issue - 71

OUTLOOK2023
expensive coastal markets in favor of more affordable places
that offer more amenities.
Key Trends
Among the key trends identified by industry professionals are
the following:
Normalizing. Industry professionals see property market
fundamentals normalizing, as some markets weaken due
to diminishing tailwinds from the pandemic, as well as
the potential for an economic downturn. But the effect is
expected to be uneven, with the residential and industrial
sectors cooling down while hotels and retail heat up.
Structural changes from the pandemic will persist. Online
spending is receding from pandemic highs but is not
likely to completely revert to previous levels, and business
travel seems unlikely to recover to pre-pandemic levels for
at least several more years. Changes in how and where
people work could have a significant influence on office use
and leasing and require repositioning of current stock to
remain competitive.
Capital is moving to the sidelines-or to other assets. The
number of transactions is declining due to buyers and sellers
being unable to agree on pricing, and rising debt costs and
restrictive underwriting standards also are limiting transaction
volumes. Some institutional investors may reduce their
commercial real estate exposure, but the negative impact
could be limited by growing market share held by other noninstitutional
investors such as nontraded real estate investment
trusts.
" Too Much for Too Many. " With home prices, rents,
and mortgage interest rates soaring relative to incomes,
homeownership is slipping out of reach for many. That is
exacerbated by a continued shortage of housing. Workable
solutions have not been easy or simple to find so far.
Quality and niche assets. With many asset classes disrupted
by change, investors and markets will require projects
to have the strongest demand fundamentals and design.
Niche projects such as cold storage, life sciences buildings,
data centers, and moviemaking facilities will benefit from
continued demand.
Finding a higher purpose. Repurposing obsolete office
buildings and retail centers could fill market needs and
reduce the carbon expenditure from new construction, but
the change in asset value could be challenging for owners.
Growing pains in the Sun Belt. While Sun Belt markets continued
to be popular among residents, employers, tenants,
and investors, the report finds that some are experiencing
growing pains, with a decreasing advantage in affordability
and quality of life over cities in other parts of the country.
In focus groups conducted by ULI district councils with local
market experts, participants from Sun Belt markets-even
IMPORTANCE OF ISSUES FOR REAL ESTATE IN 2023
booming ones such as Austin and Nashville-were more
likely to cite downsides such as living cost, housing affordability,
and infrastructure quality as being regional disadvantages.
" Nashville is like a teenager, " one focus group
participant said. " We have grown too quickly and haven't
decided what we want to be when we grow up. "
Smarter, fairer cities through more infrastructure spending.
New federal infrastructure spending, from expanding
broadband access to reconnecting communities divided by
highways, could have a significant impact on communities
across the nation.
Climate change's growing effect on real estate. A warming
planet may alter where people want to live and invest, as
well as pose health risks and lead to higher energy costs. It
also creates greater risk for investors.
ESG compliance and government regulation. Institutional
investors are seeking greater disclosure from real estate
companies on environmental, social, and governance (ESG)
WINTER 2023
URBAN LAND
69
2023 Winter Issue

Table of Contents for the Digital Edition of 2023 Winter Issue
