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.
After analyzing data from MSCI Real Capital Analytics on trades categorized by quartile and deal size, 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. The gap was even wider for multifamily properties at 9.1 percentage points.
Interestingly enough, retail properties showed an opposite trend with smaller deals experiencing a steeper decline in volume compared to larger ones.
In terms of office properties specifically, there was a significant 15-percentage-point difference between the smallest and largest quartiles due to challenges securing financing for these assets leading investors towards smaller deals with lower leverage levels according to CBRE’s brief.
However,the report suggests that if capital markets improve it could result in an even greater disparity between well-occupied high-value office buildings versus underperforming secondary or tertiary assets which may encourage more trading activity among top-tier assets.
