The plummet of commercial deal volume in the past year was eerily resonant of past history, with the 51% year-over-year sales decline not seen since the Global Financial Crisis, according to the latest data from MSCI Real Assets.
Every property sector saw a double-digit plunge in transaction volume year over year, with the 61% drop in transaction volume in the apartment sector factoring as the foremost downshift. Office, with a 56% annual decline, also saw a significant dropback, while industrial fell 55%.
Retail, at just a 38% annual decline, showed the most resilience from 2022. Interestingly, entity-level deals within the retail sector were at elevated levels for retail, per MSCI; the market decrease in the asset class was driven by sluggishness in individual asset sales, which were down 44%.
Prices also fell from 2022, although the rate of price deceleration has been easing. The RCA Commercial Property Price Index (CPPI) maintained by MSCI fell 5.9% annually but saw a 1% pickup quarter over quarter. MSCI also reported that the CPPI rose on a higher frequency basis, with the annualized rate of change from the third quarter at 0.5%.
Industrial led the charge, with a 4.3% annualized growth pace from the third quarter. The hardy industrial sector is also buoying nominal prices, as the only major property class to see price gains both year over year (up 0.5%) an quarter over quarter (1.1%).
Not all the news is as dire as it seems at first glance. The microscopic rate environment of 2021 and 2022 broadly boosted investment, but only as long as rates were favorable. The annual drop of over 50% seen last year was, in some ways, artificially inflated by the high recent peaks the market had to fall from. Consider that, relative to the average annual pace of sales volume from 2015 to 2019, deal volume in 2023 was only down 32%.
