The 2023 Capital Markets Slowdown Has Hit Biggest Buildings The Hardest
Commercial property sales have tailed off dramatically this year, but the decline hasn't affected all of commercial real estate the same way.
Property sales worth between $5M and $25M dropped 29% from the first half of 2022 to the same period this year, Green Street's Real Estate Alert reports. For properties worth over $25M, transactions are down 61% over the same interval.
REA labels transactions in the $5M to $25M range as private capital deals and transactions over $25M as institutional deals. The latest release of data came as part of REA's Mid-Year Broker Rankings, which placed CBRE in the top spot for market share among brokerage firms in both private capital and institutional deals.
Private capital transactions in the first half totaled nearly $39B, while institutional transactions totaled almost $97B, REA reports. The 29% drop in the private capital tier is the largest year-over-year decline since REA began tracking $5M to $25M deals four years ago.
Last year, institutional deals accounted for a record-high $268B in the first half. This year's first half had much more in common with the pandemic-disrupted first half of 2020, when institutional deals totaled only $86B. REA's figures include multifamily, office, hotel, retail, industrial and niche sectors of commercial real estate.
There is little doubt as to the root cause of the transaction slowdown: the rapid rise of interest rates and uncertainty over where they wind up, REA reports. Combined with the broad pullback of banks from originating new loans, there is simply much less capital available overall, and the difficulty in completing a sale seems to bear a direct relationship to its price tag.
Even Blackstone hasn't been able to buck economic trends, as its real estate sales generated 96% less income in Q2 than it did 12 months prior. Though CBRE brokered the most transactions in both price tiers, it wasn't enough to make the CRE services giant cash-flow positive in the second quarter.
For institutional transactions, Eastdil Secured took the second-biggest market share, with JLL in third place, REA reports. In private market deals, Marcus & Millichap sat in second place and JLL again took third.
