Green Street

U.S. Investment Sales Transaction Volume Plummets 70% in 1Q

Declining property values and tightening lending standards are additional hurdles facing market participants at midyear as the stalemate between buyers and sellers continues

NEWPORT BEACH, Calif., July 10, 2023 – Green Street, the preeminent provider of actionable commercial real estate intelligence and analytics, has published a new report stating that first-quarter sales volume dropped 70% year-over-year across all four of the core sectors – Office, Industrial, Apartments and Retail – as property values continue to erode. Green Street analyzed U.S. Sales Comps data on transactions of $5 million and higher to produce the new report entitled, Property Insights: Quarterly Transaction Trends.

“Investment volumes of closed transactions indicate overall market health and shine a light on the direction of property prices. Transaction volumes tend to be robust as prices increase and tend to slow down dramatically when buyers and sellers reach a stalemate amid rapidly declining property values,” said Daniel Ismail, Managing Director and Co-Head of Strategic Research for Green Street.

“Total commercial real estate transaction volume is down from the pace set in '22 and, if trends continue, set to be well-below the most relevant historical time frames. The confluence of higher interest rates, higher spreads, fewer willing lenders, and an even thinner group of willing/distressed sellers led to precipitous declines in transaction volume,” Ismail wrote in the new report.

Additional takeaways from the Property Insights report include:

  • REIT M&A, another barometer of transaction volume, is on-pace for an average year.
  • Public-to-public M&A deals are more likely than privatizations given the availability and cost of debt financing.
  • The debt markets remain challenged as lending standards have tightened over the past year.
  • Quarterly net new commercial real estate loan growth by banks has been shrinking in '23 and recently turned negative.
  • CMBS issuance in 1Q23 declined 65% year-over year, but some recent deals “provide hope” for an increase in 2H23.

“Despite the slowdown in sales activity, plenty of equity capital remains on the sidelines, but wide bid-ask spreads are currently limiting transaction velocity. The bottom line is that CRE volume is likely to stay depressed in the near-term as long as debt activity is subdued,” Ismail concluded.

To find out where transaction velocity has declined the most and how it will further impact the private-capital real estate market, contact Green Street.



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