In a new Green Street report examining commercial real estate transactions of at least $5M in the company’s sales comp database, researchers Daniel Ismail and Harsh Hemnani found volume plummeted 70% year-over-year, showing only $37B in deal activity.
If the Q1 volumes are annualized, the resulting $148B is lower than any other year since 2013, possibly longer.
Even more concerning is that the drop is not limited to Office, which has been a known issue. While Office is down 79%, Multifamily is down 83%, Industrial is down 69%, strip center retail fell 59%, healthcare dropped 42% and lodging was down 26%. Net leased properties were the only category showing improvement, up just 2%.
The volume declines were also not limited to a particular region.
A key component is a so-called “stalemate” between buyers and sellers as property values have dropped. Buyers are demanding lower prices and sellers are not sufficiently adjusting prices downward.
Property values themselves are complex at the moment. While some sectors are up significantly, Green Street’s Commercial Property Price Index shows average property values are down 15%.
The report notes high interest rates, difficult CRE valuations, a general slowdown in the economy and uncertainty in regional banking are all having an effect on the availability of debt, which less debt capital in circulation.
It also highlights that there is a significant volume of capital being held in reserve, waiting for sellers to make adjustments to prices they are willing to accept. (Source)