Dec. 29, 2022
As we head into 2023, the commercial real estate industry is confronting economic turmoil thanks to rising interest rates, post-pandemic uncertainty and a potential recession. Sean Burton, the CEO of Los Angeles-based Cityview, a vertically integrated real estate investment management and development firm that specializes in multifamily and mixed-use projects, sees the multifamily sector as a bright spot in the cloudy sky. Burton leads a company that has seen investments generate nearly $5 billion across more than 130 projects, and he took some time recently to look into the 2023 crystal ball with ConnectCRE.
Q: How will multifamily fare in 2023 compared to other asset classes?
Burton: While retail and hospitality face significant challenges due to inflation and economic uncertainty, and office struggles due to hybrid/remote work and recent tech layoffs, we believe multifamily is the least likely asset class to be significantly impacted by a potential recession.
The workforce segment, which is especially impacted by severe housing shortages, high mortgage rates and the unattainable cost of single-family homes, will drive significant demand for more middle-income housing. We believe low-rise product in inner ring suburbs may outpace demand for urban downtown high rises, as people prioritize access to amenities, culture and restaurants over immediate proximity to work.
Q: What would the impacts be of a potential recession?
Burton: Multifamily has not experienced the fundamental shifts that have impacted other asset classes like office and retail. Regardless of a potential recession, people need a place to live and there remains a growing nationwide housing shortage, which should continue to drive demand for multifamily. Given the ability to adjust rental rates from day to day and week to week, multifamily should remain a valuable inflation hedge for investors.
Q: Are there certain markets that will perform better?
Burton: We believe that metro areas with strong employment, income, population and wage growth, easy access to transit and lifestyle amenities remain attractive for investment and will perform better in both up and down cycles. We think cities in the Western U.S. such as Denver, Los Angeles, San Diego, Seattle and Orange County will remain prime locations for investment.
Q: What amenities will renters look for in 2023?
Burton: With more people working in a hybrid and remote environment, coworking space is a necessity for many renters. Seamless Wi-Fi connectivity throughout communities, a variety of private and open office spaces, meeting rooms and ample plugs help ensure residents have the tools they need to be successful working from their community. Many residents are also seeking smart connectivity and access control and electric vehicle chargers are also in high demand.