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Chart showing US unemployment rate over time dipping to 3.5% in late 2022.

Decoding the Economy: Forecasting 2023 Commercial Real Estate Trends

The commercial real estate (CRE) market doesn’t exist in a vacuum – it reflects broader economic conditions like employment rates, construction levels, population patterns, and overall business sentiment.

As we move into 2023, analyzing key economic indicators can reveal crucial insights for CRE investors, developers, and others in the industry.

Employment Rates

Low unemployment typically translates to high demand for commercial space. As of December 2022, the national unemployment rate was 3.5%, quite low from a historical perspective. This suggests office and retail landlords may have continued leverage to raise rents as competition for talent keeps employment robust. However, some sectors like tech and finance have announced hiring freezes and layoffs. If those impacts spread, reduced job growth could dampen CRE demand.

Construction Activity

High levels of new construction can result in oversupply in CRE markets. According to Census Bureau data, in 2022 over $1.6 trillion was spent nationally on construction, with commercial projects accounting for a sizable portion. With rising interest rates expected in 2023, construction lending may tighten, resulting in fewer new projects breaking ground. This moderation in supply could help landlords maintain pricing power.

Construction site within metro area

Population Patterns

Demographics greatly influence real estate. Areas seeing rapid population growth due to factors like job growth or lifestyle appeal often necessitate new commercial projects. Phoenix, Dallas, Austin, and other Sunbelt cities are experiencing strong population rises. CRE investors may want to focus on these metro areas. Slow population metros like Chicago, Pittsburgh and Cleveland are riskier bets.

Business Climate

When businesses feel optimistic about growth and profits, their demand for commercial real estate tends to rise. The NFIB Small Business Optimism Index finished 2022 at a very low reading of 89.8, with only 37% of owners expecting better conditions in 2023. This gloomy outlook suggests caution in expanding space. Until business confidence improves, CRE leasing may remain sluggish outside of the most landlord-favorable markets.

By analyzing the intersection of employment, construction, population and business factors, commercial real estate professionals can make more informed decisions in the year ahead. Of course, it’s critical to drill down into metro and neighborhood-level data, as broader trends can mask important local variations. Approach 2023 with eyes wide open, and let the economic fundamentals guide your CRE strategy.


While broader economic conditions paint a mixed picture for commercial real estate in 2023, drilling down into metro and submarket trends will be imperative for success.

The Sunbelt will continue seeing strong demand, while aging Midwest and Northeast metros face more challenges. There remains optimism that the economy will avoid serious recession, which bodes well for CRE’s resiliency. Savvy investors and advisors who can spot the opportunities will be poised to thrive.

The team at North Star Commercial Real Estate Advisors has our fingers on the pulse of the latest economic trends and market metrics. Our in-depth knowledge enables us to provide actionable guidance to clients. We stay on top of employment shifts, construction updates, population patterns, and business climate measures across all of our key metro areas.

City skyline of Twin Cities Minnesota

Are you looking to buy, sell or lease commercial real estate in 2023? Want trusted advisors who can help you navigate the intricate economic forces that will shape CRE in the year ahead?

Contact North Star Commercial Real Estate Advisors today to schedule a consultation. Our team of experts will review the indicators for your particular market and property type. We’ll then suggest strategies customized for you to capitalize on opportunities and avoid pitfalls.

With uncertainties ahead, our data-driven approach takes the guesswork out of commercial real estate decisions. Get in touch now to learn how our advisory services can position you for CRE success in 2023 and beyond.

Disclaimer: The information provided in this article is for educational purposes only and should not be considered financial or investment advice. It is always recommended to consult with a qualified financial advisor or investment professional before making any investment decisions.

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Scott Naasz: (612) 819-8285


Kaitlyn Page: (701) 220-5123