To say the commercial real estate market is not facing challenges is an understatement, but it's also looking at opportunities, according to LightBox's findings and analysis in its "2023 Mid-Year Sentiment Report." Based on its industry outreach in the period from April through the end of May 2023, participants acknowledged that the market continues to change because of major outside influences from technology, climate risk and economic currents, so those who are most flexible and nimble may fare the best.

Overall, the first half of the year reflected widespread uncertainty due to three additional increases in interest rates—on top of seven last year, all of which have stalled CRE investment and related activity in lending, but also valuation and environmental due diligence work. Altogether, the Federal Reserve has raised rates 10 times since March 2022 for an average hike of 50 basis points (BPs). This type of huge wallop is something the market hadn't experienced in 15 to 20 years, LightBox reported. Moreover, more hikes are possible since Fed Chair Jerome Powell said there may be two more quarter percentage point hikes before year-end if inflation remains above his organization's target. Such changes coming fast and on top of others makes it tough to plan and adds to uncertainty and concern.

CRE industry participants also face the possibility of a recession, plus subdued capital flows, obstacles to transact deals and fluctuating property valuations. To top these off on the longer-range horizon over the next two years is a wave of billions in CRE loan maturities, which will require refinancings, especially in the office and retail sectors.

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