The commercial real estate market has experienced a slowdown in investment and transaction activity in recent years. However, the impact of this trend varies depending on factors such as property type, location, and deal size. According to a recent report from CBRE, the rising cost of capital has primarily affected larger deals.
Upon analyzing data from MSCI Real Capital Analytics on trades by quartile and specific size categories, CBRE analysts found that industrial properties saw a 7.3 percentage point decline in volume for the largest-deal quartile compared to the smallest quartile. Similarly, multifamily properties had a 9.1 percentage point gap between their largest-deal and smallest-deal quartiles.
Interestingly enough, retail was an exception to this trend with smaller deals experiencing steeper declines than larger ones. On the other hand, office properties showed a significant difference of 15 percentage points between their smallest- and largest-quartiles due to challenges securing financing for large office buildings.
However,the brief suggests that an improvement in capital markets could lead to even greater differences between well-occupied high-value office assets versus underperforming secondary or tertiary assets.This may encourage more trading activity among top-tier assets.
