This past year has been a roller coaster for real estate. As 2023 comes to a close, we want to revisit the predictions we shared in our blog over the past twelve months, and see how well our insights held up as the market evolved. While we've learned more about these stories over the past few months, many will continue to unfold in the next year.
Implications of ChatGPT
We predicted that the introduction of AI chatbots would have massive implications for job markets and industries as a whole, including commercial real estate. We have not yet seen a dramatic disruption in the CRE industry, but experts think we will see more change going forward, especially around data analytics and marketing positions, as companies continue to integrate this new technology.
First Republic's Collapse
First Republic occupied a key role as a lender and relationship banker for luxury real estate investors and owners in the Bay Area; we predicted that its collapse would cause a slowdown in luxury transactions and investment. JP Morgan ultimately stepped in to cover both customers’ deposits and existing mortgages on First Republic’s balance sheet, but as predicted transactions on San Francisco mansions have declined because no bank has stepped in to offer the same jumbo loans as First Republic.
Local Bank Consolidation
After the collapses of SVB, Signature Bank, and First Republic, we thought that further regional bank collapses might follow. This has not happened, in part due to new government measures to protect uninsured deposits. However, many believe that the situation remains precarious, with CBRE recently writing that it expects muted lending appetite and more bank failures in 2024.
San Francisco Multifamily Opportunity
We wrote that, as of mid-2023, fundamentals pointed to a compelling investment opportunity for SF multifamily real estate. These fundamentals, including limited supply and historically high cap rates, are similar today, suggesting that investors have largely not capitalized and the opportunity remains despite negative headlines.
San Francisco Office Recovery
In our most recent two blog posts, we listed some possible drivers of a recovery in San Francisco’s office market, such as demand from AI businesses and increased downtown foot traffic. Leasing by AI groups has continued, and we have seen increased investment interest around quality properties such as the Transamerica building, hopefully indicating a further recovery in the coming months.
While it’s always difficult to forecast where the market will move, we hope this review is a useful summary of some of the major events in CRE over the past year, and provides some guidance on how these events will continue to play out in 2024!