Commercial real estate sales volume for first half of 2023 drops below same-period sum in 2020
Commercial real estate sales volume for first half of 2023 drops below same-period sum in 2020
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For the first six months of this year, $181.77 billion of commercial real estate sales occurred, a sharp drop from the $424.51 billion in transactions a year prior, according to MSCI Real Assets data requested by The Business Journals.
The count of transactions was the lowest in the first half of 2020, at 10,637, compared to 11,560 in the first half of 2023, the second-lowest total over the five-year span.
The MSCI data includes deals in office, industrial, retail, hotel, apartments, senior housing, development sites and self-storage.
The Federal Reserve increasing interest rates 11 times since March 2022 is considered the primary culprit behind deal slowdown.
Higher interest rates in a compressed period compared to investments that were funded by cheap capital before and during the pandemic have made deals less attractive and, in some cases, not even viable, including within relatively stable sectors.
Banks also have been pulling back on new commercial real estate lending activity as red flags about the future of certain property types — namely, dated office towers — continue to emerge.
“Despite ample available debt, commercial lending has been hampered by choppy markets,” said Rachel Vinson, president of U.S. debt and structured finance for capital markets at CBRE, in a statement. “Borrowers who have to transact in the current environment are turning to shorter-term fixed loans until stability returns. Costlier credit with tighter terms continues to encourage many to sit on the sidelines.”
What’s on the horizon?
The major lever that’ll influence when commercial real estate acquisition activity comes back is, of course, interest rates.
“Real estate is a long-term game, and this isn’t the highest rates have ever been — it’s just the highest they’ve been in a really long time,” Matt Riccio, senior real estate analyst at RSM U.S. said, adding investors are still adjusting to what a new normal will be.
https://www.bizjournals.com/cincinnati/news/2023/08/16/commercial-real-estate-sales-volume-slows.html
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