CRE Investment Sales Fell Off A Cliff At The End Of 2022

Investor interest in U.S. commercial real estate properties, which turned in a record year in 2021, plunged in 2022, according to Colliers and Real Capital Analytics data.

The declines worsened toward the end of the year as higher interest rates bogged down investors' interest in taking on new debt.

Investment sales volume nationwide for all property types dropped 72% in November from the same month in 2021, the data showed.

The two darling property types among investors, industrial and multifamily, experienced the largest drops in sales volume compared with a year earlier, down 80% and 74%, respectively, though they are still attracting the most investment capital. 

In November, $11.4B worth of multifamily assets traded hands nationwide, while $5.1B of industrial property did so, Colliers reports. Investors put less than $4B in each of the other major property types — office, retail and hospitality — in November.

Investment in multifamily and industrial isn't just down compared to 2021. For multifamily, November volume was down 19% compared to the pre-pandemic average monthly volume, defined as 2015 through 2019. For industrial, the drop was 29% compared to the monthly average during those pre-pandemic years.

Hospitality asset sales have done relatively better, down only 15% year-over-year from November 2021. Compared to monthly pre-pandemic averages, their total sales volume is up slightly.

Colliers predicts that when December's investment sales numbers are reported, they will not be anywhere near 2021's pace either.

CoStar likewise reports a weak fourth-quarter 2022 for investment sales, based on data the company tabulated, with volume well under 25% of the annual total during Q4, specifically, 17.9%.

If that total stands, it would be lowest sales volume for a fourth quarter since the recession-stricken Q4 2008, which saw only 17.3% of the year's investment sales occur, CoStar reports.