Published on Thursday, September 21, 2023

Its mid-year report looks at where interest rates were thought to be, and where they are now.


Apartments are the place to be, according to investors polled in CBRE’s Global Investor Intentions Survey.

Its “Midyear Pulse Check: U.S. Multifamily Market” report laid out the most common concerns in commercial real estate overall – interest rates, credit availability, state of the economy – but for the first time, the survey taken in late 2022 said that they would target multifamily properties more than any other property type.

Nearly 70% of those operating in the Americas said they expected to keep their allocation to real estate about the same in 2023. Another 20% said they expected it to increase.

The Sunbelt and several Midwest and Northeast markets, including Indianapolis and Boston, were a focus.

Those markets “provide near-term rent growth potential since they did not have a glut of new construction,” according to the report, and “offer significant cost savings relative to other areas of the country.”

The four primary concerns they expressed – rising interest rates, credit availability, fear of a recession, and persistent inflation – played out, but mostly not to as dramatic a level as some anticipated.

The Federal Reserve on Sept. 20 indicated that they will likely have one more interest rate hike in 2023. Putting it above the current range of 5.25% to 5.50%, that is slightly higher than initial investor expectations from the survey.

At the Fed meeting this week, Fed Chair Jerome Powell said 12 Fed officials said they would support one more hike this year and seven said they’d support staying flat.

The Fed noted that the economy has been expanding at a “solid” pace — an update from a “moderate” pace.

CBRE last week said it expects the Fed to begin slashing interest rates in the first half of 2024 with the fed funds rate ending the year between 4.50% and 4.75%.

With credit availability, more than 90% of respondents to CBRE’s 2023 U.S. Lender Intentions Survey said their underwriting would be more conservative, and 68% expected lower originations in 2023.

“This is consistent with actual market performance so far this year,” CBRE said.

“Near-term recession expectations have become much less certain as the year has progressed. While some economists envision a ‘soft landing’ for the economy, CBRE expects a moderate recession to begin in early 2024 as the lagged impacts of tight monetary policy more fully take hold.”

Inflation has seemingly peaked in 2023, as those polled believed. The Consumer Price Index (CPI) has been steadily falling since peaking at 8.9% in June 2022 and currently stands at 3.7%.

CBRE said it expects annual inflation to end the year at 2.9%, compared with more than half of surveyed investors’ earlier expectations of more than 4%, according to that late 2022 poll.

"As inflation and interest rates further stabilize, we expect greater investment activity over the next 18 months. As the favored asset type for investors, multifamily will likely be the first to benefit," it said.