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 asset type, location, and deal size. According to a recent report by CBRE, the rising cost of capital has primarily affected larger deals. However, there are exceptions to this rule.
Upon analyzing data from MSCI Real Capital Analytics on trades based on 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. For multifamily properties, there was a 9.1 percentage point gap between these two categories.
Interestingly enough though retail sector showed an opposite trend with smaller deals experiencing steeper volume declines than larger ones.
In terms of office properties specifically ,there was a significant difference between small and large deals with a 15-percentage-point gap between them.” This is likely due to challenges securing financing for office buildings which led investors towards smaller transactions with lower leverage,” according to the brief.
However,the report suggests that if capital markets improve,it could result in an even more pronounced contrast between well-occupied high-value office assets versus underperforming secondary or tertiary assets.This may encourage more trading activity among top-tier larger assets.
