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DePaul/ULI Chicago Sentiment Report Highlights Impact of Interest, Inflation
A wide array of market forces, including inflation, interest rate hikes, and return to the office, are compounding effects on commercial real estate in Chicago, across the U.S. and in global markets. The announcement that August inflation accelerated to 3.7 percent is cause for further economic concern. More than 45 percent of real estate professionals are bearish on market conditions, according to a Chicago 2023 Mid-Year Sentiment Report.
Other headwinds include debt maturities, financial instability, inflationary pressures and the threat of a recession. The confluence of factors has resulted in a significant decline in investment activity as well as values. More than 75 percent think a recession will happen by year-end. Although 45.3 percent believe the landing will be soft, 33.6 percent expect a hard landing.
CRE Leaders React to the 2023 Mid-Year Sentiment Report
- In response to the report’s findings, Mary Ludgin, Senior Managing Director, Global Head of Investment Research, Heitman, said, “We are wrestling with inflation. The Fed made some really remarkable moves over the past year. I fear the Fed likely overshot and that we are entering into a period of slow growth or recession.”
- “Hindsight is always 20/20. It’s easy to speculate or suggest that if the Fed had taken a more aggressive posture sooner to slow inflation, everyone would be better off now,” said Steven Weinstock, Senior Vice President and Regional Manager of Marcus & Millichap. “It’s been a very difficult job that is open to a lot of second-guessing.”
- Greg Warsek, Executive Vice President and Group Leader of Commercial Real Estate at Associated Bank, offered, “We shocked the system with the intent of curbing inflation, and I am not certain that we’ve given it enough time to take hold.”
- “What’s happening with interest rates, inflation, and a lack of transaction activity is a cause for some concern,” said Mike Kamienski, Partner, Baker Tilly. “We all know that real estate investors like to do deals, so I don’t expect the lack of transactional activity to last too long.”
