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 /PRNewswire/ -- 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. 

About Green Street
Green Street is the preeminent provider of actionable commercial real estate research, news, data, analytics, and advisory services in the U.S. and Europe. For more than 35 years, Green Street has delivered unparalleled intelligence and trusted data on the public and private real estate markets, helping investors, banks, lenders, and other industry participants optimize investment and strategic decisions. The firm delivers exclusive market information, conclusion-driven insights, and predictive analytics through a SaaS platform. To learn more, please visit www.greenstreet.com.

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SOURCE Green Street