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 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 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. The gap was even wider for multifamily properties at 9.1 percentage points.
Interestingly, retail properties showed a different pattern with smaller deals experiencing steeper declines than larger ones.
In terms of office buildings, there was a significant difference between small and large deals with a 15-percentage-point gap between the two categories due to challenges securing financing for office projects according to CBRE’s brief.
The report also noted that an improvement in capital markets could lead to an even more pronounced difference between high-value top-tier office assets versus underperforming secondary or tertiary assets which may encourage more trading activity among larger well-occupied properties.
