1. HOMEBUILDING SENTIMENT RISES

• According to the latest data from the National Association of Home Builders (NAHB), homebuilding confidence is on the rise. The NAHB/Wells Fargo Housing Market Index (HMI) rose seven index points to a level of 42, its highest reading since September and the most significant monthly increase in the index since June 2013.
• Homebuilder sentiment registered at 81 one year ago, but started to fall as mortgage rates and other borrowing costs slowed demand and hindered supply in 2022. While index levels below 50 are considered in ‘pessimistic’ territory, sentiment had fallen to a low of 31 in December.
• According to analysts at NAHB, the uptick in sentiment reflects recent incremental gains in housing affordability amid a persistent housing shortage.

2. FED MEETING MINUTES

• Despite reducing their pace of rate increases in January, leading to increased market optimism, recently released minutes from the FOMC’s January meeting show that most officials remain “highly” concerned about inflation.
• The resilience of labor market tightness has some FOMC members concerned about the upward pressure that wages may continue to place on broader prices. Officials note that while recent monthly data has warranted a slowing of their tightening efforts, they will need “substantially more” evidence of slowing inflation across the board before halting rate increases.
• Notably, a “few” members expressed a need to maintain a 50 basis point increase in January. FOMC members have converged in their economic projections over the past several months, so a crack in the consensus could be a significant signal about the uncertainty of our current economic picture.
• As of February 23rd, 73% of the market expects a 25 basis point increase at the FOMC’s March meeting, while 27% expect a 50 basis point hike. One week ago, before the minutes were released, expectations at these levels were 85% and 15%, respectively.

3. A BUSINESS TRAVEL REBOUND

• A recent report by Placer Labs studying foot traffic activity for the four major business travel sectors — airports, trains/buses, convention centers, and hotels—found that hotels and airports have climbed past pre-pandemic levels. In contrast, trains/buses and convention centers continue to recover.
• The report shows hotels have experienced the most robust post-pandemic recovery (using a 2019 baseline). As COVID shut down most travel activity in April 2020, hotel foot traffic dropped an unprecedented 97% from its January 2019 level. The sector recovered as high as 62% above pre-pandemic levels by July 2021.
• Airport traffic, which fell by 93% in April 2020, similarly recovered much of its activity by Summer of 2021 but climbed as high as 23% by July 2022.
• Foot traffic at train and bus stops as well as at convention centers, has yet to recover 2019 activity levels. In July 2022, train and bus stop traffic hit its post-pandemic peak at -6% below pre-pandemic levels, while convention centers peaked in April 2022, down -11%.
• All four major business travel sectors saw activity decline below pre-pandemic levels by the end of 2022, reflecting a broader reduction in business travel expenses amid heightened inflation and recession fears.

4. INDEPENDENT LANDLORD RENTAL PERFORMANCE

• The on-time payment rate in independently operated rental units improved by 197 bps between January and February, coming in at 83.4% and reaching a new post-pandemic high, according to the latest Independent Landlord Rental Performance Report by Chandan Economics. It was the fifth consecutive month that average on-time rent collections have held above 81%, the first in the history of the dataset.
• Of the states with at least 500 tracked units in the RentRedi-Chandan Economics sample, Colorado holds the highest payment rate in the country in February. 91.4% of independently operating units in Colorado have paid their rent on time this month. Washington (91.1%) and Massachusetts (89.5%) are close behind.
• Analyzing performance trends at different rental price points, units with monthly rents below $1,000 continue to register the lowest average on-time payment rate through February, coming in at 82.5%. Upper middle-priced rental units (charging between $2,000 and $2,499 per month) perform the strongest, with a February on-time payment rate of 86.5%. On-time payment rates for all prices rose or remained level from the previous month in February.
• 2–4-unit rental properties held the highest on-time payment rates of all sub-property types in February, coming in at 84.2% — level with January.

5. INDUSTRIAL ORIGINATIONS FALL

• According to an analysis by the Mortgage Bankers Association (MBA), originations fell by 54% in Q4 2022, led by a decline in financing for Industrial projects.
• Higher borrowing costs brought forward by the Fed’s monetary tightening have impacted demand levels across all Commercial Real Estate. Still, it has had an outsized impact on Industrial, which experienced the best pandemic-era performance across the major property types. According to MBA, the dollar volume of loans for Industrial properties fell 69% year-over-year through Q4 2022.
• In addition to the higher borrowing costs, uncertainty about the direction of consumer spending and retail markets also affects transaction demand.
• Office properties had the second steepest fall through Q4, with lending falling by 56%. Multifamily lending fell by 52%, Hotel fell by 46%, and Retail declined by 44%.

6. MSCI-RCA PROPERTY PRICE INDEX

•  Commercial real estate prices fell 4.8% year-over-year and 2.7% month-over-month through January, according to the latest national all-property index released by MSCI-RCA. It was the steepest annual fall in the all-property index since 2010.
• Higher borrowing costs remain the main culprit as deal activity slows, pushing pricing lower. Price growth slowed across all major property subtypes during January.
• Industrial registered the only monthly price increase in January, following December’s trend.
• Apartments posted the largest decline across property subtypes, falling 2.8% month-over-month and down 4.6% year-over-year.
• Retail prices fell 0.9% month-over-month in January and 0.1% year-over-year.
• Office prices are down 0.8% month-over-month and 0.7% year-over-year through January. Suburban offices were down 1.1% month-over-month and 0.5% year-over-year, while CBD Office held steady from December but fell 0.9% year-over-year.
• Prices in the six major gateway markets tracked by MSCI-RCA posted their sharpest annual decline since June 2010, falling by 6.9% year-over-year, and registered their eighth consecutive monthly decline. Meanwhile, non-major metros fell 2.0% year-over-year, with prices falling 1.8% from the month before.

7. CPI INFLATION

• The Consumer Price Index (CPI) rose 6.4% year-over-year and 0.5% month-over-month through January, according to the latest numbers from the Bureau of Labor Statistics. The annual inflation rate has fallen for seven consecutive months, though month-over-month inflation was slightly higher than in December.
• Core CPI, which removes food and energy prices from the calculation and is more closely tied to monetary policy decisions, rose 5.6% over the past 12 months and 0.4% between December and January.
• Used cars and trucks led all price declines on both a monthly and yearly basis, dropping -1.9% month-over-month and 11.6% year-over-year.
• Fuel oil and medical care services also saw noteworthy declines to start the year, falling 1.2% and 0.7% month-over-month, respectively. However, fuel oil remains a significant contributor to annual price pressures, rising 27.7% year-over-year, while gas as a utility is close behind at 26.7%.

8. PHILADELPHIA FED MANUFACTURING INDEX

• According to data from the latest Philadelphia Fed Manufacturing Index, manufacturing activity continues to fall. The barometer fell by 24.3% in February, almost triple its January decline of 8.9%. Markets had expected a 7.4% decline.
• February was the lowest index reading for the Philly Fed index since May 2020 and was the sixth consecutive monthly decline in manufacturing activity.
• There are three components of the index, one that measures overall activity, one that measures new orders, and one that measures shipments. The shipments subindex was the only one that registered a positive result in February, though at tepid levels.
• Forward-looking indicators were more positive, such as expectations for growth and prices over the six months — but remained modest from a historical perspective.

9. NEW RESIDENTIAL CONSTRUCTION

• Housing permits for privately-owned housing units experienced a slight rise in January from a month earlier, climbing 0.1% to a seasonally adjusted annual rate of 1.33 million, according to the latest data from the US Census Bureau and HUD. Permits remain 27.3% below their January 2022 level.
• Housing starts in January fell by 4.5% month-over-month to a seasonally adjusted annual rate of 1.30 million. Starts are down by 21.4% over the last 12 months.
• Housing completions rose 1.0% month-over-month in January to a seasonally adjusted annual rate of 1.40 million and are up 12.8% year-over-year.
• While slowing homebuying demand and falling prices have increased housing affordability lately, tepid
  permits and starts have held supply low, failing to alleviate the effect of the housing shortage.

10. US RETAIL SALES

• According to advance estimates from the US Census Bureau, US retail and food service sales climbed 3.0% month-over-month in January to a seasonally adjusted $697.0 billion. Sales are up by 6.4% year-over-year.
• January represented the largest monthly increase in sales since May 2021 and came after a 1.1% decline in December. The annual increase in sales is above levels seen in the previous two months but remains well below the gains seen over the past two years as activity rebounded from early-pandemic lows.
• Separating Retail trade sales from the total, sales were up 2.3% month-over-month and 3.9% year-over-year through January.
• Food services and drinking places are up by 25.0% over the past 12 months, while general merchandising stores have seen sales climb by 4.5% over the past 12 months.

SUMMARY OF SOURCES

• (1) https://www.nahb.org/blog
• (2) https://www.federalreserve.gov/monetarypolicy/fomcminutes20230201.htm
• (3) https://go.placer.ai/library/navigating-a-new-normal-in-business-travelcommutes?submissionGuid=11055299-e0be-4a53-8e59-6bcdd8534d47
• (4) https://www.chandan.com/independent-landlord-rental-performance-report
• (5) https://www.costar.com/article/1225048335/commercial-real-estate-lending-drop-steepens-ledlower-by-industrial-financing
• (6) https://www.msci.com/research-and-insights/market-insights
• (7) https://www.bls.gov/news.release/cpi.nr0.htm
• (8) https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/manufacturingbusiness-outlook-survey
• (9) https://www.census.gov/construction/nrc/pdf/newresconst.pdf
• (10) https://www.census.gov/retail/marts/www/marts_current.pdf

People should take a step back from short-term changes and consider the big picture, according to one agent.

Due to the recent uptick in unpredictable mortgage rates, timing has become crucial in the housing market.

Rates that were approaching 6% are now approaching 7%, which has many buyers returning to the sidelines. On Friday, Mortgage News Daily reported the rate to be 6.78%. Recent inflation news is what caused the rate to increase.
In prepared remarks, Los Angeles Redfin realtor Justin Vold noted that while well-priced properties continue to receive many offers, he did observe that this week, as interest rates began to creep back up, buyers made fewer offers.
Since the beginning of the epidemic, buyers have been extremely sensitive to rates, according to Vold. I’m recommending folks pull back from daily rate changes and think about their long-term demands in today’s topsy-turvy market.
It is a perfectly good time to buy because there isn’t much competition if someone plans to live in a home for a long time and can pay today’s loan rates.

According to Vold, it might not be the best time for someone looking for a short-term residence and/or who can bear to pay their mortgage with a 6% or 7% interest rate.
Although interest rates will eventually decline, we don’t know when they will, so buyers must be prepared to maintain the original payment for the whole 30 years of their loan, he said. Reducing the monthly payment will be a plus when the opportunity to refinance does arise.
The housing market recovery will remain precarious until we see inflation and the general economy improve for a longer period of time, Redfin Economics Research Lead Chen Zhao said in prepared remarks.

According to Redfin, almost 85% of homeowners have interest rates far below 6%, and many are content to hold onto them.
The median list price of recently listed homes was $378,118, an increase of 1.2% over the previous year and the lowest since May 2020.

We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.

The ride will become unpleasant if you are unable to remain seated on the horse.

Rents will be pushed down by a weaker labor market and an increase in the availability of multifamily housing.

We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.

1. GDP

• Real GDP increased at a 2.9% annual rate in Q4 2022, according to the advance estimate by the Bureau of Economic Analysis. Economic output has slowed from Q3 2022, when real GDP grew at a 3.2% annual rate.
• While recession fears have amplified heading into 2023, economic output has remained robust from a historical standpoint given the Fed’s aggressive monetary tightening measures. The US has now recovered all output lost during the pandemic, with the end of year output in 2022 registering a 2.1% annual growth rate.
• Driving the increase in output during Q4 were increasing in private inventory investment, consumption, government spending, and nonresidential fixed investment. These increases were partly offset by declines in residential fixed investment and exports.
• Manufacturing, specifically petroleum/coal products, chemicals, as well as mining, utilities, and construction, led increases in private inventory investment.
• An increase in both goods and services spending contributed to the growth of consumer spending.
• Growth in intellectual property products propelled nonresidential fixed investment during Q4, while falling single-family construction and industry commissions caused a drag on residential fixed investment.

2. MORTGAGE APPLICATIONS

• Mortgage applications climbed by 7% during the week ending on January 20th, 2023, following a massive 27.9% surge the week before, according to the Mortgage Bankers Association.
• Mortgage application demand fell significantly during the second half of 2022 as mortgage rates rose steeply. After falling for much of December, mortgage applications increased to begin 2023 and have increased sharply throughout January.
• Refinance applications roes 14.6% during the week ending January 20th, while purchase applications rose 3.4%.
• While homebuying demand remains relatively weak compared to early-cycle levels, cooling prices and borrowing costs could draw in many households who remained sidelined in recent months due to affordability constraints.

3. INTEREST RATE EXPECTATIONS

• Federal Funds futures pricing data shows an overwhelming 98% likelihood of a 25 basis points hike at the FOMC’s January 31st-Febuary 1st meeting, according to forecasts complied by the Chicago Mercantile Exchange.
• Inflation has slowed in recent months, leading to a growing consensus that the Federal Reserve will soon reduce the pace of rate-hikes, though not stop them entirely. Consumer price growth remains well above the central bank’s 2% target and officials have signaled the need to continue restrictive policy until price pressures calm.
• In a recent statement, Fed Vice Chair Lael Brainard acknowledged that labor supply remains constrained, but that demand has cooled in recent months and a 1970’s style wage-price spiral hadn’t materialized as some feared. Conversely, Brainard spoke of a “price-price” spiral taking place as retail markup growth exceeds input price growth. Cooling demand and loosening supply chain constraints, she hopes, will continue to lead to disinflationary pressures on goods.

4. NEW HOME SALES

• New sales of single-family homes climbed for the third consecutive month, according to the latest data from the US Census Bureau.
• Home sales rose 2.3% in December to a seasonally adjusted annualized rate of 616k units, up from the revised 602k units registered in November. Falling mortgage rates has increased homebuying demand in recent weeks, evident in a recent increase in mortgage applications.
• Home sales continue to be lower on a year-over-year basis, dropping 26.6% over the past. twelve months.
• Sales rose in the more “affordable” regions of the Midwest and South while falling in the Northeast and West.

5. INDEPENDENT LANDLORD RENTAL PERFORMANCE

• The on-time collection rate for independently operated residential properties improved by 6 basis points between December and January, landing at 81.5%, according to the latest Independent Landlord Rental Performance Report by Chandan Economics. It was the fourth consecutive month that average on-time rent collections have held above 81%, the first in the history of the dataset.
• Gateway markets (New York, Los Angeles, San Francisco, Washington, DC, Houston, Dallas, Chicago, and Boston) have maintained higher on-time payment rates than units located elsewhere for thirteen consecutive months through January 2023. The current on-time collection rate for gateway metros stands at 84.2% through January 15th compared to 81.0% in non-gateway metros.
• The on-time payment rate remained higher for units in the Sun Belt compared to units located elsewhere for the second consecutive month, reaching 82.4%
• Analyzing performance trends at different rental price points, units with monthly rents below $1,000 continue to register the lowest average on-time payment rate through January 2022, coming in at 79.8%. Upper middle-priced rental units (charging between $2,000 and $2499 per month) perform the strongest, with a January on-time payment rate of 85.6%. High-priced rentals, defined as those charging more than $2,500 are a close second, with an on-time payment rate of 8.5% in January.
• 2–4-unit rental properties held the highest on-time payment rates of all sub-property types in January, coming in at 82.4%.

6. MSCI-RCA PROPERTY PRICE INDEX

• Commercial real estate prices rose 0.9% year-over-year through December, with prices falling 1.2% monthover month according to the latest national all-property index released by MSCI RCA.
• Price growth slowed across all property subtypes during the fourth quarter of 2022 but remained mostly positive, as higher borrowing costs dampened transaction activity.
• Industrial registered the only monthly price increase in December; However, both the warehouse and flex sales have fallen on a year-over-year basis. —18% and 2.0%, respectively.
• Apartments prices fell 1.9% month-over-month in December but climbed 1.8% year-over-year.
• Retail prices growth slowed to 3.1% year-over-year and fell 0.5% monthly in December. Still, retail centers saw double-digit annual sales growth to end the year. Shop sales fell sharply in December, with the dollar volume of new deals declining by 29% from the month prior.
• Office prices rose 2.9% year-over-year in December while falling 0.4% month-over-month. Year-over-year, the Hotel sector saw both positive pricing trends and sales growth, rising by 7.2% and 5.0% respectively.
• Prices in the six major gateway markets tracked by MSCI-RCA continued to slow in December, falling by 2.1% year-over-year and registered its seven consecutive monthly decline. Meanwhile, non-major metros slowed to 2.6% year-over-year, with prices falling 1.0% from the month before.

7. CMBS SPECIAL SERVICING RATE

• The CMBS special servicing rate tracked by Trepp fell 3 basis points in December, its first monthly decline in the past six months.
• Special serving, which typically increases during economic downturns, fell significantly in recent years as pandemic constraints eased. However, rates began to rise during the second half of 2022 as borrowing costs rose amid weakening demand.
• Lodging saw the largest decline in special servicing, falling 32 basis points from November. Lodging, Apartment, and Retail special service rates all declined in December while Office special serving was unchanged and Industrial rose slightly.
• Office accounted for 85% of new special servicing transfers, but loans coming out of special serving largely offset this.

8. MILLENNIAL HOMEBUYING DEMAND

• A new survey by Real Estate Witch reports that 92% of millennials have indicated that inflation has either delayed or significantly impacted their buying plans.
• While the relationship comes as little surprise, Baby Boomers, who have greater wealth on average, are more than twice as likely than millennials to say that their decisions have not been impacted by inflation.
• Specifying those challenges, 59% of millennial respondents claim to be saving more for a home, 36% plan to spend more on a home, 28% are delaying plans for now, 26% are buying a fixer upper, while 25% have opted into buying a smaller home.

9. WFH COMMUTES

• A review by the National Bureau of Economic Research estimates that would-be-commuters save 72 minutes per day on average when working from home.
• Despite growing concerns about productivity shortfalls brought forward by work-from-home adoption, data shows that much of saved commute time has been funneled into work.
• Roughly 40% of remote workers claim to use previous travel time to work a job or side hustle. 34% use this time to relax or exercise, while about 11% use the time to take care of loved ones.
• The paper also noted the various “costs” saved from work from home adoption, including direct ones such as money for gas or public transit, as well indirect ones like personal grooming for work.

10. CONSUMER SENTIMENT

• Preliminary January data for the University of Michigan’s Survey of Consumers showed consumer sentiment rising for the second consecutive month, climbing 8% above December’s level while remaining about 4% lower than this time last year.
• From a historical perspective, sentiment remains extremely low as consumers battle high inflation, but as inflationary pressures have eased in recent months, sentiment has improved.
• Individual assessments of their own personal finances climbed 16% in January to its highest reading in eight months. While consumers’ short-run economic outlook fell slightly in January, the long-run outlook rose by 7%, reaching its highest level in three months.
• Year ahead inflation expectations are also on the downtrend, falling for the fourth straight month and reaching its lowest point since April 2021. However, according to the analysis, expectations remain above the 2.3-3.0% inflation forecasts that was experienced in the years leading up to the pandemic.

SUMMARY OF SOURCES

• (1) https://www.bea.gov/news/2023/gross-domestic-product-fourth-quarter-and-year-2022-advanceestimate
• (2) https://www.mba.org/news-and-research/newsroom/news/2023/01/25/mortgage-applicationsincrease-in-latest-mba-weekly-survey
• (3) https://www.newyorkfed.org/microeconomics/sce#/
• (4) https://www.census.gov/economic-indicators/#home_sales
• (5) https://www.chandan.com/independent-landlord-rental-performance-report
• (6) https://www.msci.com/research-and-insights/market-insights
• (7) https://www.connectcre.com/stories/office-dominates-new-transfers-as-cmbs-special-servicingdeclines-in-december/?utm_medium=email&_hsmi=242560693&utm_content=242560693&utm_source=hs_email
• (8) https://www.realestatewitch.com/2023-millennial-home-buyer-report/#inflation
• (9) https://www.nber.org/system/files/working_papers/w30866/w30866.pdf
• (10) http://www.sca.isr.umich.edu/

Our Orange County commercial real estate brokers will help you every step of the way in finding the right multifamily investment property, contact us for details.

Orange County is one of the most sought-after places to invest in commercial real estate. With its vibrant economy, abundant entertainment, and diverse landscape, Orange County is the ideal place to invest in commercial real estate. Whether you are an individual investor looking to purchase a commercial property or a business owner looking to expand your operations, Orange County offers a wide range of commercial properties for sale.

Orange County is home to many different types of commercial properties for sale. From office buildings and retail spaces to industrial and warehouse properties, Orange County has something for everyone. The region has also been experiencing a surge in investment activity in recent years, making it an attractive destination for investors.

What to Look for When Choosing a Commercial Property in Orange County

When it comes to investing in a commercial property in Orange County, there are a few key factors to consider. First, it’s important to assess the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Third, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation. Finally, it’s important to consider the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation.

Benefits of Investing in Commercial Real Estate in Orange County

When it comes to investing in commercial real estate in Orange County, there are many benefits to consider. First, the local economy is strong and growing, making it an attractive destination for investors. This can translate into appreciation potential and rental income potential.

Second, the area is home to a variety of businesses, making it an ideal place to invest in commercial properties. There are a variety of different types of properties available, from office buildings and retail spaces to industrial and warehouse properties.

Third, the area has a vibrant entertainment and cultural scene, making it an attractive destination for businesses and investors alike. This can help to drive up property values and attract tenants. Finally, the area has excellent transportation links, making it easy to reach from other parts of the country.

Steps to Finding a Commercial Property in Orange County

When it comes to finding a commercial property in Orange County, there are a few key steps to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Third, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.

Fourth, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Finally, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.

What to Consider Before Investing in a Commercial Property in Orange County

Before investing in a commercial property in Orange County, it’s important to consider a few key factors. First, it’s important to evaluate the financials of the property, including the cost of acquisition and the cost of holding. This will help you determine the best investment strategy for your needs.

Second, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.

Third, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment.

Finally, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Tips for Finding the Right Commercial Property for Sale in Orange County

When it comes to finding the right commercial property for sale in Orange County, there are a few key tips to consider. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to analyze the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Third, it’s important to assess the location of the property and its proximity to amenities, such as schools, shopping malls, and public transportation. These factors can all have an impact on the value of the property and its potential for appreciation.

Fourth, it’s important to consider the potential for appreciation and rental income. Many investors look for properties with potential for appreciation as well as rental income potential. This will help you maximize your return on investment

Finally, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to investing in a commercial property in Orange County.

Financing a Commercial Property in Orange County

When it comes to financing a commercial property in Orange County, there are a few key considerations. First, it’s important to research the local market and determine the types of properties available. This will help you decide the best areas to invest in and the type of property that best suits your needs and budget.

Second, it’s important to assess the local economy and consider the potential for growth. The local economy can have a major impact on the value of the property and its potential for appreciation.

Third, it’s important to evaluate your own financial situation and determine what type of investment strategy best suits your needs. This will help you make an informed decision when it comes to financing a commercial property in Orange County.

Finally, it’s important to consider the types of financing available. Many investors turn to traditional lenders, such as banks and credit unions, to finance their commercial properties. Other investors look to private lenders or alternative financing options. It’s important to evaluate all of your options and choose the financing option that best suits your needs.

Conclusion

Investing in commercial real estate in Orange County can be a great way to build wealth and generate passive income. However, it’s important to do your research and consider all of the factors before making an investment. It’s important to understand the local market, evaluate the potential for appreciation and rental income, assess the location of the property, and evaluate your own financial situation.

With the help of SVN Vanguard, you can find your ideal commercial investment property in Orange County. Our team of experienced real estate professionals can help you find the right property for sale and provide the guidance you need to make an informed decision. Contact us today to get started on your commercial real estate journey.

We are ready to assist investors with Santa Ana commercial properties. For questions about Commercial Property Management, contact your Orange County commercial real estate advisors at SVN Vanguard.

The report states that these estimates depend on robust employment and household income growth, as well as decreased inflation.

However, it is anticipated that housing prices will drop in 2023, and data sources indicate that more new multifamily supply will enter the market at a time when demand would be waning. The situation of the labor market during the course of the upcoming year, in our opinion, poses one of the largest threats to the performance of the multifamily market in 2023.

Overall, timing will be very important.

Given the anticipated increase in cap rates, Freddie Mac predicts that real estate values will remain stable but “may see minor decreases in the year ahead.”

This will result in a decrease in transaction volume through the end of 2022 and into 2023.

Freddie Mac anticipates volume in 2022 to be in the $460 billion to $470 billion range, down 5.5% year over year, and volume in 2023 to be down around an additional 4% to 5% to $440 billion.

According to its study, we anticipate fewer transactions given the negative leverage scenario, which supports the notion that investors are waiting for the market to return to an equilibrium

Given their anticipated low note rates and the robust recent market performance, we believe many financed properties are well positioned to cover their loan obligations. As a result, debtors are less under pressure to sell real estate at a cheaper price and might instead wait for better investment possibilities, which would also reduce overall business volume.

The business stated that these projections are predicated on slower increases in Treasury rates and inflation.

The timing of this affects the anticipated volume rise in 2023, according to Freddie Mac. We might see a greater volume in 2023 if this occurs sooner and investment demand rises sooner. We could anticipate lesser volume if it takes longer, especially if the economy enters a recession, as the price discovery and negative-leverage condition are protracted.

1. Q3 GDP & CONSUMER SPENDING REVISED UP

• The Bureau of Economic Analysis reported an upward revision to Real GDP in the third quarter of 2022, mainly reflecting a revised total in U.S. consumer spending. The latest estimate shows a 3.2% annualized increase in Real GDP during Q3 2022, revised up from the previous estimate of 2.9% and a reversal from the 0.6% decline seen in Q2.\
• Upward revisions occurred in consumer spending, nonresidential fixed investment, and state and local government spending. These revisions were partially offset by downward revisions seen in private inventory investment and exports.
• Both real incomes and spending are on the rise to close 2022. In November, personal income increased by $80.1 billion, or 0.4% annually, while personal consumption expenditures increased by $19.8 billion, or 0.1% annually.
• The spending-driven upward revision to growth is notable, given the ongoing analysis of the Federal Reserve’s interest rate policy, its impact on investment, and the debate around the potential for a U.S. recession. Outside of housing and other rate-sensitive products, consumers have largely shaken off the Fed’s rate hikes in their spending decisions. Historically, it is atypical for an economy to enter a recession while real incomes and spending are accelerating.

2. CRE DEBT CLIMBS

• According to a recent breakdown by Trepp, outstanding Commercial Real Estate debt increased by $474.2 billion during Q3 2022 to $5.52 trillion, a 9.3% increase year-over-year.
• CMBS trusts and other securitization vehicles saw the largest relative increase through Q3 2022, climbing by 15.58% or $106.1 billion to a total of $786.9 billion outstanding. Banks and thrifts, which hold the largest volume of commercial mortgage debt, saw holdings rise by 10.4% year-over-year.
• Trepp estimates that a total of $447.42 billion of commercial mortgages will come due in 2023, with the bulk of them held by banks and thrifts.\
• Multifamily loans outstanding rose by $170.8 billion last quarter, also a 9.3% increase year-over-year. Notably, the GSEs Fannie Mae and Freddie Mac only accounted for $106.1 billion. According to the analysis, the remainder of loan growth results from a rise in loans held by banks, thrifts, and life insurance companies alongside an increase in securitization vehicles’ inventory.

3. LOCAL GOVERNMENTS AND ARPA SPENDING

•  A recent report by Brookings analyses how municipalities have budgeted the $65 billion allocated to them through the American Rescue Plan Act (ARPA) funding. The first half of the funds were allocated to states and localities in May 2021, while the second half was allocated 12 months later in May 2022.
• The total share of committed State and Local Fiscal Recovery Funds (SLFRF) reached 51% by the end of March 2022, then climbed to 61% by the end of June, roughly one month after the second batch was received.
• Large cities and consolidated counties have allotted funding quicker, having budgeted roughly 70% of their SLFRF allocations compared to just 52% for counties.
• According to a review of Treasury Department data on ARPA allocations, 43% of city and county commitments were allocated to stabilizing government operations. Roughly 15% of funds have been budgeted for public health, though this decreased from 17% of the first batch. Community aid projects have increased from 9% of budgets after the initial half was allocated to 14% through June 2022. How recovery funds are allocated helps indicate where local government priorities lie.

4. PROLOGIS 2023 SUPPLY CHAIN FORECAST

• Prologis recently released a list of supply chain-related predictions that it was making for 2023, particularly anticipation of slowing warehouse development despite rapid rent growth.
• Prologis expects U.S. warehouse development starts to decline by up to 60% and reach a seven-year low, projecting south of 175 million square feet of development throughout the calendar year.
• Rising interest rates alongside stubborn prices for labor and materials are likely to constrain construction, while high demand amid low vacancy rates will likely continue to produce double-digit rent growth for the Industrial sub-sector, according to the report’s forecast. Prologis estimates that even if new warehouse demand were to fall to zero, the national vacancy rate would only increase by 260 basis points, creating a floor for rents.

5. COMMERCIAL REAL ESTATE PRICES

• Commercial real estate prices slowed in November to 4.9% year-over-year, the slowest annual pace for CRE prices in over two years, according to the latest national all-property index released by MSCI RCA. Prices fell 0.4% month-over-month.
• Industrial retains its top spot, with prices growing 14.4% year-over-year but well below the above 20% annual increases, the sector saw throughout most of this year. Industrial also charted the most significant monthly increase, climbing by 0.6%.
• The Apartment index saw the steepest fall on a monthly basis, dropping -1.1% month over month but rising 7.4% year-over-year. It was the first month that apartment price growth dipped below a double-digit rate since early 2021.
• The Retail index rose 7.1% year-over-year but just 0.1% month-over-month. The spread between the Retail and Apartment Indexes was at its narrowest since 2014.
• Office prices climbed 5.1% year-over-year through November, slowing from the 12.7% rate seen at the start of 2022. The CBD Office index rose 1.8% year-over-year, while Suburban Office rose 5.9%
• Price growth in Gateway markets recorded its slowest growth since 2010, climbing just 0.7 year-over-year. Further, the Gateway index has posted five consecutive monthly declines. Non-major markets rose 6.6% annually but declined 0.2% month-over-month.

6. HOME PRICES

• Home prices saw their fourth monthly decline through October 2022, according to the latest update to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. Home prices rose 7.3% year-to-date and 9.24% year-over-year.
• Miami (+21%), Tampa (+20.5%), and Charlotte (+15%) reported the highest year-over-year increases within the 20 cities tracked by the index. San Francisco performed the weakest (+0.6%), followed by Seattle (+4.5%).
• The report analysts note that despite significant regional differences, all 20 cities tracked in the index reflect the trend of short-term decline and medium-term deceleration. Analysts note that mortgage financing will continue to face headwinds as the Federal Reserve moves interest rates higher, which may continue to weaken price growth.

7. INDEPENDENT LANDLORD RENTAL PERFORMANCE

• The on-time collection rate for independently operated residential properties fell by 156 bps between November and December, falling to 81.2%, according to the latest Independent Landlord Rental Performance Report by Chandan Economics. December’s full payment rate is expected to land at 90.7% by month’s end.
• National on-time payment rates have now held north of 81% for three consecutive months, the first time in the life of Chandan Economics-RentRedi tracking.
• Units located in the Sun Belt have maintained higher on-time payment rates than units located elsewhere for the second consecutive month. December’s on-time payment rate stands at 81.7% in Sun Belt units and 80.9% in non-Sun Belt units.
• 2–4-unit rental properties and SFRs held the highest on-time payment rates of all sub-property types in December, both coming in at 82.3%.

8. PENDING HOME SALES

• Pending home sales dropped to their lowest level since April 2020 and their second-lowest level on record during November, according to the National Association of Realtors.
• Contract signings dropped by 4% to an index reading of 73.9, the lowest reading outside of the pandemic dating back to 2001. The decline exceeded most industry estimates.
• According to the University of Michigan’s Consumer Sentiment Index, U.S. consumers are the most pessimistic about homebuying conditions that they have been since the early 1980s. While Fed tightening continues to make credit more expensive for potential home-buyers, mortgage
  rates have actually declined in recent weeks. NAR Chief Economist Lawrence Yun anticipates that the
  modest rate decline should lead to moderate increases in homebuying activity.

9. PCE INFLATION

• The PCE Price Index increased by 0.1% in November, a drop from the 0.4% increase in October and the slowest rise in price since July, according to the latest numbers from the Bureau of Economic Analysis. Prices are up 5.5% year-over-year.
• Core PCE prices, which exclude the cost of food and energy and are the Fed’s preferred inflation gauge when considering monetary policy decisions, increased by 0.2% in November, below the 0.3% rise seen
  in October. Core prices also saw their slowest increase since July
• Food prices rose 0.3% in the month, while energy prices dropped by 1.5%.

10. VTS OFFICE DEMAND

• The latest numbers from VTS’ Office Demand Index (VODI) showed an 8.3% increase in new demand for office space during October, the second consecutive month where office demand has increased, fully offsetting August’s declines.
• Much of October’s activity reflects seasonal patterns and comes amid increased economic uncertainty surrounding rising capital costs and the potential for a U.S. recession.
• The VODI remains 14.8% below its October 2021 level as the office sector converges towards a new post-pandemic normal.
• VTS finds that over the past year, new office space demand has strongly correlated with metro-area job postings, with the most notable increase in October seen in Washington D.C. while the most significant decrease tracked was in Seattle.

SUMMARY OF SOURCES

• (1) https://www.bea.gov/data/gdp/gross-domestic-product
• (2) https://www.trepp.com/trepptalk/commercial-mortgage-universe-grows-multifamily-universe-tops-
  2-trillion?utm_campaign=trepploan&utm_medium=email&_hsmi=239191945&_hsenc=p2ANqtz-9N167
  6xI0xHNSkEIPrxPf8Eq5M4mi0tzbruuQPjWoXMzGobBJKMSfvAe9zB7Iub0al7pFLDbOKx3zEYKsdPM_
  limq9EA&utm_content=239191945&utm_source=hs_email
• (3) https://www.brookings.edu/blog/the-avenue/2022/12/16/local-governments-ramped-up-americanrescue-
  plan-commitments-and-expenditures-i(4) https://www.prologis.com/news-research/global-insights/seven-supply-chain-predictions-2023
• (5) https://www.msci.com/our-solutions/real-assets/real-capital-analytics
• (6) https://www.spglobal.com/spdji/en/documents/indexnews/
  announcements/20210629-1407760/1407760_cshomeprice-release-0629.pdf
• (6) https://www.realtor.com/research/data/
• (6) https://www.nar.realtor/newsroom/existing-home-sales-experience-slight-skid-of-0-9-in-may
• (7) https://www.chandan.com/independent-landlord-rental-performance-report
• (8) https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales
• (9) https://www.bea.gov/data/personal-consumption-expenditures-price-index#:~:text=A%20
  measure%20of%20the%20prices,reflecting%20changes%20in%20consumer%20behavior
  • (10) https://www.vts.com/

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