SAN FRANCISCO, Jan. 9, 2023 — BPM LLP, one of the 40 largest public accounting and advisory firms in the country, recently released the results of its second-annual Real Estate Market Conditions Survey, aggregating insights and trends identified by real estate finance executives from across the U.S.
The survey represented a diverse subsection of sectors, including industrial (22%), multi-family (28%), office value (21%) and retail (4%). The remaining respondents (25%) came from other sectors or had a mixed real estate portfolio. The following summarizes highlights from the survey.
Overwhelmingly, 72% of respondents cited the rising cost of debt driven by inflation as a top issue. A nearly equal percentage (75%) said that high interest rates are the biggest reason that raising capital will look different in 2023. With that in mind, 62% indicated that market conditions would have an impact on their ability to raise capital in the year ahead.
“Most people and businesses are wrestling with inflation, from the grocery checkout counter to the commercial real estate space,” said Mark Leverette, BPM Partner and head of the Firm’s Real Estate Industry Group. “We are starting to see alternative and novel financing options emerge as traditional funding mechanisms remain challenged. This trend may persist even as the general market rebounds and inflation abates.”
IT spending and cybersecurity
Respondents were roughly split on whether their companies would be increasing IT spending in 2023 – 50.7% plan to increase budgets and 49.3% plan to keep budgets level. Meanwhile, more than one-third responded that cybersecurity was a high priority for 2023.
Hybrid work is common even in real estate
The two biggest responses to the question of when real estate industry financial executives expect their teams to return to the office were: 1) operations are hybrid (52.2%); and 2) workers are back in the office full-time (35.8%).
“There are real concerns on all sides of the return-to-work issue, with office culture, worker productivity and work/life balance all critical. Striking the right balance is a process, and real estate, like other industries, is working through it, often with the help of outside perspectives,” added BPM Advisory Director Brad Kettmann.
Creating a blueprint for 2023
From the survey’s data, BPM identified three key takeaways for real estate companies:
1) The time is right to consider exploring new funding mechanisms or defer borrowing.
2) With ample and growing outside threats, as well as an internal desire for more workplace flexibility, technology investment remains paramount.
3) Put your people first and be on the lookout for ways to keep them connected and supported, especially with hybrid work scenarios likely to stay in the foreseeable future. Dialoguing with professionals and evaluating project metrics in different work scenarios can be highly instructive.
“We’re grateful to the real estate finance executives who shared their insights on the market and their workplaces as we continue to collectively face new challenges,” added Leverette. “Opportunity still abounds, and our clients can always be assured that no matter how much things change, one thing remains constant – BPM will be there to help navigate uncertainty and offer stability and insight.”
To read an executive summary of the Real Estate Market Conditions Survey, please click here.
BPM LLP is one of the 40 largest public accounting and advisory firms in the United States with a global team of over 1,000 colleagues. A Certified B Corp, the Firm works with clients in the agribusiness, consumer business, financial and professional services, life science, nonprofit, wine and craft beverage, real estate and technology industries. BPM’s diverse perspectives, expansive expertise and progressive solutions come together to create exceptional experiences for individuals and businesses around the world.
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