Increases in the Effective Federal Funds Rate, combined with tightening debt and economic volatility caused commercial real estate sales to plummet 57% year over year to $78 billion in Q1 2023. According to CBRE’s U.S. Capital Markets report for the quarter , single-asset sales dropped by 55% while portfolio sales fell by 69%. Moody’s Analytics noted that transaction declines have been ongoing since Q3 2022.
Baker Tilly weighed in, stating that a challenging debt environment has significantly hindered transaction activity and major transactions consisted primarily of equity deals – “cash is definitely king in the current environment,” according to their Commercial Real Estate Market Report: Q1 2023 . Multifamily remained strong despite a 63.7% decline from last year; industrial saw a 55% decrease ending up at $18 billion; retail investment volume fell 29%, coming it at $17 billion according Baker Tilly’s analysis which also highlighted interest continuing for grocery-anchored centers and downward pressure on NNN properties due to office sector challenges impacting downtown areas specifically..
The outlook is that deals will continue but high-volume days are likely behind us until either interest rates subside or sellers adjust pricing accordingly – “sellers are willing wait out this environment longer,” Baker Tilly experts commented – however depressed REIT prices could mean opportunistic deal making opportunities as well
