Apr 12, 2024

Top 10 Hotspots of CRE Deals in the United States in 2023

Jacob Blackett
Top 10 Hotspots of CRE Deals in the United States in 2023

If you are into real estate syndication or investment management, analyzing the hot real estate markets would be crucial to making the best investment decisions in 2023. The commercial real estate market is anticipated to experience a boom shortly.

Let's start with the basics. CRE, or Commercial Real Estate, is the powerhouse of properties designed for profit. It's not just homes; it encompasses office spaces, malls, hotels, warehouses – the spaces where business thrives.

Now, before we get started, you need to note one thing: CRE investing is not a get-rich-quick scheme. It takes time, effort, and research to be successful. But if you're willing to put in the work, it can be a very rewarding investment.

Now, why should you care about CRE deals? Simple. They fuel the American economy. From iconic skyscrapers in New York City to sprawling tech hubs in Silicon Valley, CRE deals drive businesses, generate employment, and shape entire communities. They constitute a significant chunk of the economy, where billions of dollars exchange hands.

However, the question is: Where to invest in commercial real estate for better returns?

As the nation and the world normalize after two years of restrictions, technology companies, and other commercial establishments have started expanding their operations. 

In this article, let's go through the top 10 hotspots of CRE deals for 2023. Let's dive in:

Key Characteristics of the Best Real Estate Markets in the US

In real estate, the quest for the "best" market is akin to searching for treasure. But what does it take for an area to earn that coveted title? 

Firstly, it's all about location, location, location. Accessibility to major urban centers, job opportunities, and desirable amenities sets the stage.

Then, consider economic vitality. A robust job market and a diversified local economy ensure the demand for housing remains steady.

Infrastructure and Development play their part too. Areas with well-maintained roads, public transport, and the promise of future growth tend to be more attractive to investors.

But let's not forget the power of community and lifestyle. Safe neighborhoods, quality schools, and recreational opportunities are magnets for families.

Lastly, market trends can't be ignored. Keeping an eye on the trajectory of an area's property values and rental yields is crucial for long-term success.

The "hottest real estate markets 2023" real estate market is a dynamic concept, subject to change with time and economic shifts. It's about finding the right mix of these ingredients that align with your investment goals and vision. 

Top 10 Hot Real Estate Markets for CRE Deals in 2023

1. Texas

Texas has a diverse economy. So, there are suitable commercial properties in every property class. Investors can expect better returns by investing in the cities like Dallas, Austin, and Houston. We can see many high-performing tech companies and highly-paid professionals moving to this province.

The Texas CRE market is expected to remain strong in 2023, driven by a number of factors, including:

  • Texas is one of the fastest-growing states in the US, with a projected annual growth rate of 5.3%. This is driving demand for all types of commercial real estate, including office space, industrial space, and retail space.
  • Texas is also one of the fastest-growing states in terms of population, with an estimated population of 30 million or more in 2023. This population growth is driving demand for multifamily housing and other types of commercial real estate.
  • Texas has a business-friendly environment, with low taxes and a variety of incentives for businesses. This makes it an attractive place for businesses to relocate and expand, which is further driving demand for commercial real estate.

The changing economic scenario can boost this province's best real estate markets in US. Investors and syndicators can find affordable investment properties across this province. The growth in population and job opportunities make this province the first hotspot for CRE Deals on our list.

2. Idaho

Idaho has the best population and job growth rate in the country. Cities like Boise, Nampa, Meridian, and Idaho City have snowballed. As organizations across industries and commercial establishments have better growth prospects here, Idaho is the top hotspot for commercial real estate deals in 2023.

The Idaho CRE market is expected to remain strong in 2023, driven by a number of factors, including:

Idaho has one of the fastest-growing economies in the US, with a projected GDP growth rate of 5.1% in 2023. This is driving demand for all types of commercial real estate, including office space, industrial space, and retail space.

Moreover, Idaho is also one of the fastest-growing states in terms of population, with an estimated population of 1.8 million in 2023. This population growth is driving demand for multifamily housing and other types of commercial real estate.

Commercial real estate usually gets an appreciation rate of 10-15% in the Boise Metro Area. Yet, the residential real estate prices remain stable. Idaho is well-known for its low business setup cost and the lowest unemployment rate. The trends are anticipated to continue in 2023 and beyond.

3. Florida

Florida has many beautiful cities, like Orlando, Tampa, and Lakeland, steadily growing in the past few decades. Cities like Tampa have dense populations. Similarly, these are some of the most visited tourist destinations. Along with the housing market, commercial real estate is also growing in terms of appreciation and demand.

Also, Jacksonville, Florida, is the hidden gem in hot real estate markets. One might not immediately associate Jacksonville with major metropolitan areas, but this city is quietly emerging as one of the fastest-growing economic hubs in the United States. With more than one million residents in the metro area, Jacksonville's growth story is compelling.

The key driving force behind Jacksonville's ascent is its robust job market. Month after month, the city continues to create new employment opportunities, attracting talent from various corners of the country. This economic vitality has a direct impact on the real estate sector, contributing to the area's burgeoning housing market.

Jacksonville also stands out for its affordability. The cost of living in the city is approximately 5% below the national average, making it an attractive destination for those seeking quality living without breaking the bank. Moreover, the median listing price for properties in Jacksonville is significantly lower compared to the national average, providing an enticing proposition for both residents and investors.

In terms of property prices, Jacksonville offers great value. On average, a three-bedroom, two-bath single-family home costs around $182 per square foot, making homeownership accessible and appealing.

4. New York

New York is the province that has been attracting foreign investors in commercial and residential real estate for many years. 

New York has the largest economy in the United States, with a GDP of over $1.7 trillion. This is driving demand for all types of commercial real estate, including office space, industrial space, and retail space.

New York is also one of the fastest-growing states in terms of population. The city has an estimated population of 20.2 million in 2023. This population growth is driving demand for multifamily housing as well as other types of commercial real estate.

Moreover, New York is a global financial hub, home to the New York Stock Exchange and other major financial institutions. This makes it a prime destination for businesses and investors from around the world.

Also, it is a global city with a strong international appeal. This is attracting foreign investors to the city's commercial real estate market. In addition to these factors, New York also has a number of other advantages that make it a top hotspot for CRE deals in 2023. These include:

  • New York has a well-educated workforce, with over 40% of adults having a college degree. This is attractive to businesses that are looking to relocate or expand. 
  • The city has a superior infrastructure, including a world-class transportation system and a variety of amenities. This makes the city a desirable place to live and work.

Being the busiest and the most flourishing state, it is one of the hotspots for CRE deals in 2023. 

5. Washington

Like Washington DC and Seattle, the cities in this state have tremendous economic prospects and a strong labor market. Syndicators and investors may consider the commercial real estate deals here a bit costlier. However, the economic growth of the region promises excellent appreciation. Ultimately, syndicators can expect great returns for different commercial real estate deals.

Seattle is synonymous with tech innovation. With tech giants like Amazon and Microsoft headquartered here, the city has seen unprecedented growth in recent years. Seattle's commercial real estate market reflects this dynamism, with demand for office and industrial spaces remaining strong. While costs may be a consideration, the prospects for investment appreciation are robust.

In both of these vibrant cities, syndicators and investors can expect their investments to yield great returns over time. 

The economic growth of the region, coupled with the enduring appeal of these cities, makes Washington an exciting frontier for commercial real estate ventures, where the potential for success aligns with the stature of these iconic urban centers.

6. California

Silicon Valley and the most happening cities like Los Angeles and San Francisco have been the commercial real estate hotspots for a long time. The state has affluent industrial development prospects, increasing the significance of commercial real estate across this geography. California is indeed among the best real estate markets in US.

One of the state's most compelling narratives is its industrial development prospects. The advent of e-commerce and the need for efficient distribution hubs have catapulted California's logistics and warehousing sectors to new heights. This surge in demand has amplified the significance of commercial real estate across the state, with warehouses and distribution centers becoming prized assets in the CRE portfolio.

As we step into 2023, California remains a beacon for CRE investors and developers. Yet, the road ahead is not without its challenges. The trajectory of interest rates and the broader economic landscape loom large. A substantial increase in the 30-year fixed mortgage rate, potentially reaching 7%, could impact builders and developers, especially in the non-residential sector.

However, California has a track record of resilience. Its ability to adapt and innovate has been a hallmark of the state's CRE market. While challenges may arise, the allure of California's diverse industries, breathtaking locales, and a history of real estate success suggests that, even in the face of shifting economic winds, the Golden State will remain one of the most promising CRE hotspots in the nation.

7. Arizona

Cities and metro regions like Phoenix attract people living in expensive areas like Los Angeles and Seattle. Many professionals and entrepreneurs preferred tier II and tier III cities in this state during the pandemic. That has raised the state's prices and demand for residential and commercial properties.

In the office sector, Arizona is poised for a few intriguing trends in 2023. Class B conversions are expected to gain momentum as older properties are reimagined for modern workspaces. Meanwhile, Class A spaces may see new construction, reflecting the ongoing demand for top-tier office environments. Brokers in Phoenix are closely monitoring urban centers and the growth of companies like TSMC, further fueling the region's office market.

Retail leasing activity in Arizona remains robust, despite some national economic fluctuations. Business inventories have surged, indicating confidence in the state's retail sector. However, consumer spending growth is slowing, highlighting the need for adaptability and innovation in the retail landscape.

The multifamily sector in Arizona is influenced by interest rates, and it's currently a submarket to watch. Vacancy rates have reached all-time highs, providing opportunities for investors. Notably, over 80% of property deliveries in 2023 will consist of 4 and 5-star properties, catering to the evolving preferences of residents.

Vacancy rates are at an all-time high of 8.6%, creating investment prospects. The majority of property deliveries in 2023 will be upscale 4 and 5-star properties, catering to residents' desires for modern amenities and quality living spaces.

8. Ohio

Ohio is another hotspot for CRE deals in 2023 due to affordable housing options. Syndicators and investors need to choose the neighborhood carefully to ensure better appreciation and ROI. Some parts of the state are economically depressed. However, commercial properties receive a considerably fair appreciation across this state.

Columbus, Ohio, is experiencing an industrial boom of epic proportions. The demand for industrial assets in the city has reached such heights that vacancy rates are scraping record lows, hovering just above an astonishing 2%. 

As if that's not impressive enough, rents have been on an upward trajectory, increasing quarter by quarter to nearly $5 per square foot. In areas like Delaware County and northwest Columbus, these averages reach even greater heights. Columbus has truly become an industrial hotbed.

9. Tennessee

Nashville, Tennessee, has emerged as a compelling crescendo in the world of commercial real estate investments. This vibrant city, renowned for its music scene, robust economy, and affordable living, has become a prime choice for businesses seeking an optimal location to flourish.

Nashville's remarkable financial growth hasn't gone unnoticed. Forbes magazine named it the city with the greatest financial growth among the nation's largest metro areas, a testament to its economic prowess. Notably, Nashville achieved the top ranking in the annual "Emerging Trends in Real Estate," making it the first city since San Francisco in 2014 to repeat this honor.

Tennessee's central location within the United States makes it particularly attractive for businesses seeking industrial spaces. Efficient shipping and logistics are bolstered by this strategic advantage, making it a logistical hub for various industries.

Its temperate climate and a lower cost of living mean your dollar stretches further, offering a higher standard of living. This has resulted in strong demand across all commercial real estate sectors, from office buildings to industrial spaces.

10. Georgia

Georgia is another hotspot for CRE Deals in 2023. The real estate market across all types and classes of properties is healthy in this state. The reasons are population growth and better job prospects. Georgia is among the top 10 states contributing to the country's GDP. Syndicators can expect steady growth, as the economy is on a boom here.

Surprisingly, housing demand in Georgia has remained relatively resilient. A significant 32.4% of homes sold above their list price, indicating competitive bidding among buyers. Another 44.9% of homes sold below the list price as of May 2023. The sale-to-list price ratio stood at 99% in July, implying that, on average, buyers are paying very close to the seller's asking price.

While Georgia had the thirteenth-highest foreclosure rate among states in the first half of 2023 at 0.14%, it's crucial to note that this figure remains historically low. The limited housing inventory has played a role in preventing significant drops in home values.

A key driver of housing demand is the low unemployment rate in Georgia, which stood at 3.2% in July, lower than the national rate of 3.5%. Low unemployment levels create a favorable environment for homeownership and rental properties, further fueling the state's real estate sector.

In preparation for the upcoming World Cup, cities like Atlanta have embarked on a groundbreaking $5 billion development project. This ambitious endeavor is set to elevate the city's status from a rising star to a supernova in the CRE universe. Covering 50 acres and encompassing 8 million square feet of mixed-use space in the Central Business District (CBD), this project promises transformative growth by 2026.

Final Thought

In the fast-paced world of Commercial Real Estate (CRE), having a roadmap to the hottest investment destinations is like having a compass in uncharted territory.

These hotspots offer a glimpse into where the heart of the CRE market beats strongest. From bustling metropolises to emerging economic hubs, each destination presents unique opportunities and potential for growth.

Armed with this valuable insight, you're better equipped to navigate the ever-evolving landscape of hottest real estate markets 2023. 

In an industry where timing and location are paramount, this roadmap is your key to unlocking the doors of opportunity. As you explore these top CRE hotspots in 2023, note that knowledge is power, and with the right information at your fingertips, you can confidently steer your investment journey towards prosperity.

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