Executive Summary
• Worsening macroeconomic conditions and rising interest rates led to a slowdown in capital market activity in Q4 2022. A slow start to 2023 is expected.
• Global commercial estate investment volume fell 20% YOY to US $1.13 trillion in 2022. Activity weakened across all regions with a 17% YOY decrease in the Americas, a 27% YOY decline in EMEA and a 19% YOY fall in Asia Pacific. The decline in investment volume was caused by the rapid rise in financing costs and the worsening economic outlook.
• Higher borrowing costs and weaker fundamentals led to cap rate decompression across all regions and property types. While CBRE’s yield data show increases of as little as 50 bps, anecdotally cap rates are up about 100 bps to 150 bps for most properties across the Americas. Smaller increases are being reported in Europe and Asia Pacific.
• Tightening financial conditions and the deteriorating economic outlook will weigh on commercial real estate investment in H1 2023. However, conditions may be conducive for a healthy recovery in H2 2023, should interest rates stabilize.
