In 2023, the U.S. commercial real estate market saw a significant decline in transaction volume, with only $374 billion worth of properties sold according to data from MSCI Real Assets reported by the Wall Street Journal on Wednesday. This marks a 51% decrease compared to 2022 and a 14% drop from the previous year due to COVID-19 lockdowns hindering property viewings.
Despite these challenges, there is potential for an increase in deal activity in 2024 as investors have raised $240 billion specifically for U.S. real estate investments based on dry powder data from Preqin as reported by WSJ.
However, many potential buyers are still hesitant due to the wide gap between bid and ask prices according to WSJ sources. On average, pricing has decreased by 11% since its peak in early-2022 based on MSCI data. The most impacted sector is CBD office space which has seen significant price drops.
The current slowdown in deal activity resembles what occurred during the financial crisis when some of history’s most profitable property deals were made according to WSJ sources; however it would take much more economic turmoil for similar bargains to arise again in this market cycle.
