Increases in the Effective Federal Funds Rate, combined with tightening debt and concerns over economic volatility had a significant impact 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. Breaking it down, single-asset sales fell by 55% to $58 billion while portfolio sales decreased 69% to $11 billion; numbers issued by Moody’s Analytics note that transaction declines have been ongoing since Q3 2022.
Baker Tilly weighed in stating that “the protracted challenging debt environment has seriously hampered transaction activity,” adding that major transactions primarily consisted of equity deals due cash being “king” within the current environment according their Commercial Real Estate Market Report: Q1 2023 . Multifamily remained strong despite a 63.7 % year-over-year decline reported at $25 billion; Baker Tilly researchers pointed out record setting prices were seen throughout this sector during this time period as well.. Industrial investment volume also experienced a decrease of 55%, ending up at 18$ Billion according to CBRE reports; Baker Tilly noted high dollar transactions leveled out as the quarter progressed but enthusiasm still remains among investors due low vacancies, high rent growth and perceived safety from macroeconomic headwinds amidst an impending recession.. Retail investment volume fell 29%, coming in at 17$ Billion per CBRE data points ; interest continues for grocery anchored centers however office sector challenges are impacting retail especially downtown areas where bid ask spreads are exerting downward pressure on NNN properties said analysts from Baker Tilly .
The outlook is such that deals will continue getting done through 2023 yet high volumes days may be behind us until either interest rates subside or sellers adjust pricing accordingly commented experts from Baker tTlly ; depressed REIT prices could mean opportunistic deal making they added
