In their newly-released Capital Markets Report, commercial real estate services firm CBRE Group found that investments in U.S. commercial real estate totaled $166.8 billion in the second quarter of 2022, a glimmer of good news for the sector.
Considering the explosive buying spree that took place at the end of 2021 (where investment volume reached $322.3 billion) it may seem like investment has dipped in dramatic fashion, but property markets are in a very different position than they were six months ago. Last year, demand for commercial properties soared and debt was inexpensive (the federal funds rate hovered at .08 percent). Investment activity in 2022 has slowed due to a number of factors: rampant inflation, steep interest rate hikes, commercial loan tightening, and an economy teetering on a recession. But investment activity hasn’t leveled off, it’s actually grown in the long-term. Even with higher borrowing costs, investment in commercial real estate increased by 10 percent compared to the same time last year. Additionally, portfolio transaction volume went up 31 percent year-over-year.
Investors overwhelmingly flocked to the Multifamily sector. Second quarter activity totaled $78 billion, a year-over-year increase of 32 percent. Industrial came second with $31.6 billion and offices came third with $24.1 billion. Although forecasts for different asset classes vary, the industry’s prognosis as a whole is still favorable going into the second half of the year.