Increases in the Effective Federal Funds Rate, combined with tightening debt and economic volatility concerns took their toll on commercial real estate sales in Q1 2023. According to CBRE’s U.S. Capital Markets report for the quarter , overall deal volume dropped by 57% year over year to $78 billion. Single-asset sales fell by 55% to $58 billion while portfolio sales decreased 69% to $11 billion, according Moody’s Analytics data indicating a decline of transactions since Q3 2022.
Baker Tilly weighed in that “the protracted challenging debt environment has seriously hampered transaction activity” and major deals consisted primarily of equity ones; cash is indeed king in this current climate as noted by Baker Tilly’s Commercial Real Estate Market Report: Q1 2023 . Multifamily sector remained strong despite 63.7% decrease from previous year ($25bn) due record-setting prices observed throughout 2023 start; industrial sector saw a drop of 55%, ending up at 18bn but still generating enthusiasm among investors for its low vacancies, high rent growth and perceived safety amid macroeconomic headwinds as national recession looms; retail investment volume fell 29%, coming down at 17bn with interest continuing towards grocery-anchored centers yet office challenges impacting downtown areas’ NNN properties bid/ask spreads exerting downward pressure on them too..
The outlook suggests deals will continue being done during 2020 though high volumes are likely past us until either interest rates subside or sellers adjust pricing accordingly – absent distressed buyers it is expected sellers will wait out current environment longer before making decisions – depressed REIT prices could mean opportunistic dealmaking opportunities however..
