CRE Investment Soared in Q2 Despite Headwinds

Investment in commercial real estate soared by 10% year over year in the second quarter despite increasing inflationary headwinds, according to a new report from CBRE.

Investment volume hit $167 billion in the quarter, with the trailing four quarter figure registering $881 billion, a historic high. Entity-level transaction volume decreased by 17%, however, over 2021 figures, a fact CBRE says is likely owing to higher borrowing costs. Portfolio transaction volume also increased by 31% year over year.

Among asset classes, multifamily led the way with $78 billion in Q2 volume, followed by industrial & logistics with $32 billion and office with $24 billion. Retail investment increased by 41% year over year to close at $21 billion.

The RCA Commercial Property Price Index increased by more than 18% in the quarter year over year, with industrial prices increasing the most (27%). Multifamily followed close behind with a 24% year over year uptick. And the annualized NCREIF total return was 21.5% in Q2, with industrial’s average total return hitting an eye-popping 47.7%.

 On a trailing-four-quarter basis, New York was the top market with $67 billion in volume, followed by Los Angeles ($65 billion), Dallas ($50 billion), Atlanta ($40 billion) and San Francisco ($39 billion).  Houston had the biggest year over year increase in volume at a whopping 150% uptick.

Private investors represented 61% of total investment volume in the quarter with $102 billion in deals. CBRE data also shows that institutional investors were net buyers over the course of the quarter, while private investors, REITs and cross-border investors were net sellers. 

Inbound cross-border investment increased by 16% year-over-year, led by Canada, Singapore, and South Korea, but was down by 9% from Q1 due to the strengthening U.S. dollar. Multifamily was again the leading sector for investment, with $3 billion, followed by industrial with $2 billion and office with $1 billion.  But again, retail was a standout, with investment volume ticking up 28% over the first quarter figures to $248 million. Cross-border investment in US properties shot up sharply in 2021 as CRE deals hit record highs globally, with overseas investors focusing primarily on the apartment and industrial sectors. Total cross-border deal volume hit nearly $71 billion, nearly double 2020 levels, according to Real Capital Analytics. Cross-border deals accounted for 8.5% of total US property acquisitions and are officially back to pre-pandemic levels.