Abstract

The article is an overview of current trends in the real estate market in 2023 and predicts their development in the near future. Based on the latest data and analytical research, the article covers several key aspects, including market activity, deterrents and new opportunities for investors and property buyers. The article discusses the current market situation, as well as the causes and factors influencing trends, such as economic stability, changing regulatory policies, demographic changes, and the impact of the COVID-19 pandemic. The article then looks at future projections and discusses expected trends in the real estate market in 2023. She highlights possible increases in home prices, increased demand for commercial real estate in some industries such as technology and healthcare, and the growing popularity of sustainable real estate. In addition, the article touches upon important innovative technologies such as blockchain, artificial intelligence and the Internet of things. At the end of the article, it is concluded that the real estate market in 2023 will continue to develop and adapt to new requirements and trends. Investors, developers and property buyers must be prepared to adapt to changing conditions and seize emerging opportunities to succeed in this dynamic industry.

Real estate is one of the most important sectors of the global economy, which is constantly undergoing changes influenced by the needs and preferences of consumers. With the development of society, technology and lifestyle changes, there has been a significant shift in people’s preferences for housing and commercial real estate. These changes affect market trends and require market participants to adapt and innovate. With global assets of nearly $340 trillion (79% of which is in the residential sector alone), real estate is the largest industry the world has ever seen. Real estate is worth more than all of the world’s equities and debt securities combined, and nearly four times the world’s GDP. Since 2019, the real estate economy has been tested by inflation, Covid-19, the unfolding cost-of-living crisis and skyrocketing interest rates. And while the real estate industry weathered the storm relatively well a couple of years ago, thanks to the advances and tools of governments that supported the market during these difficult times, the coming turmoil seems much more worrisome.

Real Estate Market Trends 2023: Analysis and Forecast — Sourced Photo

Real Estate Trends 2023

1. High inflation and interest rates will hold back real estate sales. The most obvious real estate trend in 2023 is rising interest rates, which is seriously affecting real estate transactions. Let’s look at the real estate market in the U.S., where the Fed Funds Rate (Federal Reserve) increased from 1.5% in early 2022 to 5.25% in June 2023. The real estate market reaction has been negative, with sales of homes, commercial buildings and new construction starts slowing dramatically.

2. Markets with limited housing supply will show better behavior throughout the recession. Real estate experts believe that areas with strong job growth and limited housing supply should hold up better than markets with a large supply of housing. Once the short-term supply is worked off, markets will revert to limited supply with rents rising again, but that can’t be said for markets that have a greater supply-demand imbalance.

3. Technology budgets will shrink in the near future. According to Deloitte, one of the rapid trends in real estate for 2023 is an industry-wide reduction in real estate technology spending amid soaring inflation, rising labor costs and continued supply chain uncertainty. Many real estate experts foresee some level of technology cuts in their 2023 forecasts, and about half of the experts do not anticipate any budget increases at all, especially in Europe.

4. Separating the leaders from the laggards will be accelerated by technology adoption. While some are cutting their technology budgets, inevitably sacrificing operational performance, others will move forward by embracing one of the major new trends in real estate 2023 – “proptech.” Real estate companies are targeting outsourcing their back-office functions to real estate technology companies (also known as proptechs). Of particular interest in this trend for 2023 are: customer relationship management, internal data management, real estate management and reporting.

5. Renting will surpass home buying in demand, creating new opportunities for companies and investors. As mortgage rates continue to rise almost universally, more and more people are turning to long-term rentals rather than home purchases. This nascent trend presents many opportunities for numerous tech startups that are redefining the way people look for rentals (e.g., Canadian startup Properly).

6. The focus is shifting from owning the property itself to the “tenant experience” it can provide. “Tenant experience” is the sum of all aspects that affect the occupants of a property during their stay. This can include services and amenities, maintenance and cleanliness, and of course, quality communication with the real estate service provider. However, as tenant expectations change, providing a decent tenant experience becomes nearly impossible without an industry-wide shift in thinking about how firms interact with tenants, end users, investors and developers. Deloitte calls the new business model Real Estate-as-a-Service (REaaS), which involves not just physical space, but digital services that combine data, technology and strategic change. Real estate executives and investors can further benefit from the REaaS model by embracing the following real estate technology trends:

Customer Relationship Management technologies
Green / sustainable technologies
Dynamic / reconfigurable design
Flexible leasing models
Added conveniences
Interactive mobile apps for communication and updates.

7. Smart City technologies will be the focus of real estate in 2023. Smart City, ClimateTech, GreenTech, Artificial Intelligence, Internet of Things and big data technologies will largely determine what the housing market will look like in 2023. Experts suggest that more than 50% of all technology investments will go to startups that utilize new green ways to develop, build and use property. Because this area of real estate has been seriously underinvested for decades, there are many opportunities for technology innovators and investors. The most lucrative opportunities for manufacturing companies, given the skyrocketing gas and electricity prices in Europe, are related to the need to reduce energy consumption.

8. Equity ownership democratizes the real estate space through real estate tokenization. Blockchain is helping to democratize and spread ownership of a single property among multiple stakeholders by converting real estate assets into tokens, like the Bahnhofstrasse building in Zurich and the UK’s Greenwich Peninsula project. And despite the recent volatility in the cryptocurrency market, the trend of real estate tokenization is gaining momentum in 2023.

9. Real estate management technology will be in the spotlight. In recent decades, real estate management has experienced steady growth as a field with promising opportunities for modern businesses. While 2009 shows that property management revenue was around $60 billion, 2022 boasts $99 billion in the U.S. alone. With North America and Europe leading the global real estate market, the industry will continue to grow despite political turmoil and economic fluctuations.

10. A vacant workplace will be converted into an apartment building. Back in early 2020, everyone thought that once the pandemic was over, everyone would collectively revert back to their pre COVID-19 office work patterns. However, this has not turned out to be the case and many offices remain vacant. Experts believe that these workplaces will be converted into apartment buildings in the next three years. Or at least there will be attempts to do so as the world suffers from a severe shortage of residential real estate. One of New York’s most prominent office landlords has announced a new $1.5 billion fund to “advance the redevelopment of offices into residential properties.” However, this will not happen globally because most office buildings are too difficult or too expensive to retrofit.

Conclusion

Against the backdrop of thickening clouds in the economy and shrinking real estate transactions, most experts maintain a fairly optimistic outlook for 2023. As some companies cut their technology budgets, others are embracing proptech, thereby widening the gap between the real estate market leaders and laggards. Rental real estate will overtake home buying in 2023 as skyrocketing mortgage rates will deter people from spending on a new home. GreenTech will be one of the biggest real estate trends in 2023 for construction companies and new companies looking to secure their financing rounds. Overall, major real estate technology trends in 2023 include CRM systems, property management platforms and data management tools, as well as tokenization technology and various listing systems for rentals. Changes in the global economy and consumer preferences are continuously impacting the real estate market. Developers and realtors must be willing to adapt and innovate to meet the changing needs of customers.

List of References

Christopher Smith “The Future of Real Estate: Real Estate Trends 2018-2023”, 2018.
Stefan Swanepoel “Real Estate Confronts the Future: Real Estate Trends for 2019 and Beyond”, 2019.
Michael Mandel “Future Commercial Real Estate Technology: Real Estate Trends and Innovations Shaping 2021 and Beyond”, 2020
Stefan Swanepoel “Real Estate Confronts Reality: The Future of Real Estate for 2021 and Beyond”, 2021.