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The first quarter of the year was anything but boring for the commercial real estate sector. Recent events in the banking sector raised concerns about lending activity in the market. While commercial real estate relies heavily on the banking sector for capital, there was growing concern that recent bank failures would make it more difficult to obtain a commercial real estate loan. However, according to the Federal Reserve, commercial real estate loans from small national commercial banks were flat during February and March despite bank failures. Meanwhile, in April, lending activity is picking up week after week.
Additionally, most commercial real estate sectors continue to experience slower increases in rental prices and higher vacancy rates compared to the prior year. While the office sector is still struggling to recover from the pandemic, vacancy rates have reached new all-time highs. As multi-family construction has outperformed in recent years, apartment rental growth has slowed further from all-time highs during the pandemic. But even though leasing activity is slower, the retail sector was able to keep vacancy rates near 4%. And rental prices for industrial space grew more than 10%, significantly faster than before the pandemic.
Read the full report to see how each commercial real estate sector performed in the first quarter of 2023.