2023 U.S. Investor Intentions Survey: Less Investment Activity Expected

Key Findings

• Investors cite rising interest rates, a potential recession and limited credit availability as their greatest challenges this year, according to CBRE’s 2023 Investor Intentions Survey.
• More than half of investors expect to decrease purchasing activity in 2023 compared with 2022 levels. Amid lower pricing dynamics, 60% of respondents say they will either sell less than last year or not sell at all.
• High-performing secondary markets, particularly in the Sun Belt, continue to attract investors. Dallas, Miami, Austin, Nashville and Raleigh-Durham are expected to perform best.
• More investors will implement opportunistic and debt strategies than last year because of attractive returns amid higher interest rates and tighter financial market conditions.
• While investors remain committed to ESG, nearly half of respondents say that the worsening economic outlook will limit the extent to which they consider ESG criteria in their investment decisions.

CBRE’s 2023 U.S. Investor Intentions Survey finds that rising interest rates, a looming recession and less credit availability will weigh on investment activity in 2023. Nearly 60% of respondents expect to purchase less real estate in 2023, while only 15% expect to purchase more. Almost half of respondents expect to decrease purchasing by more than 10%.

Investors are hesitant to sell assets as market pricing falls. Sixty percent say they will either sell less or not sell at all, while only 27% expect to sell the same amount as last year.

Figures 1 & 2: Less buying and selling activity to reduce total investment volume this year

Source: U.S. Investor Intentions Survey, CBRE Research, December 2022.

The most sought-after sectors remain multifamily, particularly apartment complexes, and industrial, led by modern logistics facilities in major markets. Grocery-anchored centers are the most popular subsector for retail investors, while office investors largely prefer Class A assets in prime locations.

While sector preferences are largely unchanged from last year, more investors are adopting opportunistic and distressed strategies to take advantage of market conditions. Most expect price discounts of up to 30% across sectors, with shopping malls and value-add office assets expected to offer the greatest. Despite changes in strategy and pricing, almost 70% of respondents expect no change in fund allocations to real estate from last year.

Investors continue to prefer high-performing Sun Belt markets, led by Dallas/Ft. Worth, Austin, Miami, Los Angeles and Nashville.

Figure 3: Investors prefer Sun Belt and high-performing secondary markets

Source: U.S. Investor Intentions Survey, CBRE Research, December 2022.

Adoption of ESG standards will likely continue. More than 80% of respondents do not think that deteriorating economic conditions will affect their adoption of ESG criteria altogether. Nevertheless, about half of respondents think the current environment will limit the extent to which ESG criteria are considered in their investment decisions.

The Bottom Line

Concerns over rising interest rates, tighter financial conditions and a looming recession are negatively impacting investor sentiment. This will weigh on commercial real estate investment activity, particularly in the first half of 2023. CBRE forecasts that 2023 investment volume will be down by 15% from last year. As interest rates and economic conditions stabilize in the second half of 2023, we expect investment activity will increase.