Is 2023 A Good Time To Sell Your Commercial Real Estate

The real estate market is constantly in flux, and predicting the future of commercial real estate is complex. However, many experts in the field agree that 2023 could be a great time to sell commercial real estate.

“Based on our expert research, the real estate market may reach a point of “normalization” in terms of rent and tenant demand in 2023.”

Many opportunities exist for affluent people and investment strategists to capitalize on the current real estate outlook. With an ever-changing market in flux, commercial real estate presents many potential benefits for investing. In addition, asset values are expected to peak in 2023 – making it a great time to sell your investments or assets.

“The 20-year institutionalization trend in commercial real estate, in which more prominent investment managers outperform smaller companies and affluent people, will continue as long as the market is substantially fragmented.”

Commercial real estate investments can significantly add value to your portfolio and provide a steady income stream. However, selling them at the right time can be critical to maximizing your return on investment.

“Our company has built a multi-million dollar commercial real estate portfolio by sticking to fundamental, time-tested principles and practices designed to sustain income, value, and growth through nearly any transient market conditions.”

Owner's Investment Goals

Property owners have a variety of investment strategies and objectives when it comes to positioning their investments. For example, investors may look for real property to diversify their asset classes to obtain acceptable returns over a long period. However, real estate investors should also avoid undue amounts of risk, as this could put them in an unfavorable position if the market turns against them. Ultimately, having clear objectives and well-defined strategies will help real estate investors achieve their desired return on investment without taking on too much risk.

“There is an abundance of strategies available to investment property owners – perhaps more than those available to owners of any other asset class (e.g.),”

As part of an investment strategy, investors should identify areas of their investment business that can benefit from marketing and promotional efforts to capitalize on opportunities. They should also consider different real estate market segments to balance their portfolios, such as multifamily, self-storage, mobile home parks, retail, and industrial. Diversification gives excellent exposure to different strategies while providing risk management benefits.

“Diversification is a key part of investment strategy because it helps to protect investment portfolios from losses.”

Before making any decisions, ask guiding questions to help define your financial goals. A tax specialist knowledgeable about real estate investing will be an invaluable consultant in helping to maximize personal savings and profits. With the right plan in place, it’s possible to create a secure portfolio while still meeting personal and investment goals.

“When you are setting financial goals, there are some guiding questions you can ask yourself to help craft an investment plan and ensure that you are on the right track.”

Market Data Indicators

The seven interest rate hikes of the last twelve months have meant that prices remain high the industrial sectors have remained relatively stable, with many experts expecting this trend to continue. However, ballooning inflation and rising interest rates are creating uncertainty. Still, commercial real estate remains one of the few performing sectors in a slow real estate market, which indicates that this could be a good time for sellers to sell as rising cap rates suggest that commercial real estate prices may begin facing a decline in the next two quarters.

“Despite seven interest rate hikes over the last twelve months, the commercial real estate market remained stable.”

“The industrial sector remained one of the strongest commercial real estate performers in 2022, despite rising interest rates and ballooning inflation.”

Comparatively high mortgage rates, higher home prices, sales escalations, and the housing shortage are all factors driving the real estate market. Prices have increased uncertainty for many homeowners and prospective sellers, with rising prices and low inventory levels in some areas. Buyers have to contend with more competition, slowing down activity. The ruffly 25 % decline in home market values in many regions across the nation is likely to cause uncertainty in the real estate investment markets.

“The slow-down in sales that began in February 2022 market will continue into next year as buyers contend with comparatively high mortgage rates, low inventory, and still high home prices.”

According to Freddie Mac, the commercial real estate sector is generally more resilient than the residential real estate sector and has been able to weather downturns. As a result, these properties can still make suitable investments even in an uncertain economic climate. The data also indicates that the uncertainty in the residential real estate sector may benefit the multifamily sector, which helps alleviate some of the current housing shortage.

“Industrial real estate will probably be the most resilient sector, and the housing shortage will benefit the multifamily sector.”

Economic Cycle

The 2023 economic cycle is an excellent time to consider selling commercial real estate property. With uncertainty in the housing market, demand for commercial rental properties is expected to be sustained.

Realty partners report strong demand for commercial properties as businesses expand, creating more jobs and opportunities for growth. Furthermore, the current recession has not severely impacted the outlook of the real estate market, ensuring that prices remain stable and investors can find success in their investments.

“Across the broader commercial real estate market, a recession will likely create some softening in fundamentals and net operating income and slow investment sales and development activity.”

The 2023 economic cycle is an opportune time to sell commercial real estate property. Despite unprecedented inflation, the job market, financial conditions, strong balance sheets, occupier demand, and investment volumes in the commercial real estate markets remain stable. This stable investment environment has also led to heightened rental growth.

In conclusion, investors should consider selling their commercial real estate properties during the 2023 economic cycle as there are indications of a slow-down.

“This is undoubtedly a difficult time in the real estate space, but operators and managers who are flexible and able to adapt to changing circumstances will continue to strengthen their operations and find opportunities to invest in high-quality real estate assets.”

Interest Rate Increases

Many commercial real estate investors wonder if now is a good time to sell their property, given projected interest rate increases. In addition, the real estate market has become increasingly complex in recent years.

“With rates escalating higher, home sales — and home prices — hitting the brakes, and increased uncertainty felt throughout the market, many prospective sellers and buyers are nervous about next year.”

Given the projected interest rate increases in 2023, now may be an excellent time to consider selling your commercial real estate property. With increasing interest rate increases expected to continue through the next two quarters, cap rates will likely increase, and prices will decline.

“The slow-down in sales that began in February 2022 market will continue into next year as buyers contend with comparatively high-interest rates, low inventory.”

Recent weeks have seen bankers predict higher rates for the rest of the year. The Mortgage Bankers Association has indicated that rates could reach 6.8% or higher by the 2nd or 3rd quarter, almost double last year’s rate. These rate increases could harm property price growth as buyers may need help to obtain financing.

“The slow-down in housing activity and higher mortgage rates will cut the pace of home price growth, according to MBA.”

Cap Rates

Given the current cap rates in 2023, now may be an excellent time to consider selling your commercial real estate property. Unfortunately, this means that prices are likely to begin to decline.

Real estate syndication can be beneficial in this climate because it allows multiple investors to pool their resources and acquire more significant properties. These factors make now an ideal time to sell your commercial real estate property.

“While a rising interest rate environment is usually an indicator of a strong economy when interest rates rise, prices for commercial real estate tend to cool initially, and cap rates tend to rise.”

Higher interest rates can make it more challenging to purchase a property, but they also mean higher cap rates and corresponding lower prices. Therefore, capitalization rates are an essential indicator of the value of a commercial property.

Additionally, rising rate debt may put additional pressure on rental prices and thus less rent revenue for properties. With current interest trends indicating higher returns from real estate investments than other asset classes, now is a great time to take advantage of this trend with your commercial properties before the market shifts back again.

“Higher interest rates in 2023 will put additional pressure on properties with floating-rate debt, and capitalization rates will increase substantially.”

The past year has been challenging, with high inflation and market volatility due to the supply chain issues caused by the trade war and the Ukraine crisis. In addition, interest rates are at year highs, and there is potential for further rate hikes.

Realist Price Point

When determining a realistic price point when selling your commercial real estate property, it is crucial to consider several factors. First, real estate valuation and market trends should be considered to determine the property’s current market value. Additionally, market rates for similar properties and a competitive market analysis should be conducted to get an idea of the sales price.

Finally, buyers’ expectations must be kept in mind as they will ultimately decide whether or not they are willing to pay the asking price set by the seller. With all these components carefully considered, sellers can create a realistic price point for their commercial real estate property in 2023.

“Value is defined as the most feasible price the property could reasonably earn in an active, open, and competitive market when the transaction is approached fairly and knowledgeably by both buyer and seller.”

Taking into consideration individual factors like location, condition of the property, as well as other potential tax implications will help sellers decide on a realistic price point for their commercial real estate property in 2023

Confused and Uncertain?

With so many investment options, confusion as to where to invest leads to inaction. Schedule a FREE – NO OBLIGATION – NO STRINGS ATTACHED call. Or email me with your questions and thoughts at allen@SteedTalker.com. I’ll help you sort it all out, and you’ll soon be on your way to prosperous investing to live more abundantly in all areas of life.

About the Author __ Dr. Allen Lomax

With careers in academia, podcasting, and real estate investing, Dr. Allen Lomax inspires us to break open our minds’ secrets to discover individual and universal well-being. Through passive real estate investments, he helps enlightened investors create time freedom to live abundantly in all life’s areas.