CRE Investment Volume Up 10% in Q2 – Commercial Real Estate Executive

Image by Gerd Altmann via Pixabay.com

US commercial real estate investment rose 10 percent year-over-year in the second quarter of 2022 to $167 billion, with industrial and logistics investment accounting for nearly $32 billion of the total and office investment 24 billion dollars, according to a recent CBRE report. Volume for the past four quarters reached a record $881 billion.

The industrial sector reported a slight decline in its investment volume, down 1.3 percent year-on-year to $31.6 billion in the second quarter of 2021. The office sector reported a larger decline – down 9.5 percent – from the second quarter of last year, when office investment reached $26.6 billion. The multifamily sector was the leading sector with a total of $78 billion, a 32.4 percent year-over-year increase from $59.1 billion during the same period last year

“While we expect 2022 sales volumes to end the year at a healthy level from a historical perspective, we see some weakening for the remainder of the year amid higher interest rates and uncertainty as the macroeconomic landscape evolves,” Darin Mellott , senior director of capital markets research for CBRE, said Commercial Real Estate Executive.

.

  • Top markets for commercial real estate investment volume in the second quarter of 2022. Image courtesy of CBRE

While portfolio transaction volume increased 41 percent, entity-level transactions declined 17 percent year over year in the second quarter, largely due to higher borrowing costs. The Federal Reserve began raising interest rates in March, the first rate hike since the start of the pandemic – with a 25 basis point increase, followed by a 50 basis point increase in May and a three-quarter percentage point increase in June, the largest since 1994

Based on the last four quarters, New York was the largest market at $67 billion, up 104.3% year over year. Los Angeles followed with a total investment volume of $65 billion, an increase of 61%. Rounding out the top 5 are Dallas-Fort Worth with $50 billion, an increase of 91.9 percent; Atlanta, at $40 billion, up 88.3 percent; and the San Francisco Bay Area with just under $40 billion in volume, up 44.4% year over year.


READ ALSO: Top 10 Questions for CRE Executives


Houston had the largest year-over-year increase in volume over the past four quarters, up 150 percent, with about $29 billion in total investment volume. Other markets with large year-over-year increases in volume over the past four quarters were: Orlando, Florida, $15.4 billion, up 136.8 percent; Las Vegas, Nevada, $11 billion, up 132.5 percent; South Florida, $34 billion, up 117.3 percent; and Nashville, Tennessee, with $12.1 billion in total investment, up 116 percent.

Prices, cross-border investments up

Institutional investors were net buyers last quarter, while private investors, REITs and cross-border investors were net sellers, according to the CBRE report. Private investors accounted for $102 billion, or 61 percent of the total. That’s a 19.3 percent increase over private investor volume of $85.4 billion in the same quarter last year. Institutional investors had total investment volume of $39.9 billion in the second quarter, down 7.9 percent from $43.3 billion in 2021. REITs and public companies totaled $9.2 billion, a 5 percent decrease from $9.7 billion a year earlier.


READ ALSO: The Hottest Markets for Tech Talent in North America


Inward cross-border investment rose 16 percent year-on-year to $6.5 billion, but was down 9 percent from the first quarter of the year due to a stronger U.S. dollar. The multifamily sector was the leading sector for inward cross-border investment at $3 billion, followed by industrials at $2 billion and offices at $1 billion.

Canada was the leading country for inward cross-border investment from the US with $24 billion in investment. Singapore followed with $14 billion and South Korea with $5 billion.

Prices rose across the board in the second quarter, the report showed. The RCA Commercial Property Price Index is up 18.5 percent year-on-year. The industrial sector saw the largest increase of 27% year-over-year, followed by the multifamily sector with a 24.3% increase. Office property prices rose 10% in the second quarter year-on-year.

Read CBRE’s full report.