While we classify 2022 as a transitory year for capital markets, the trends of 2022 can help provide some guidance as to what we can expect for 2023 net lease activity. 

As we move through the first two quarters of 2023, we should have a clearer picture on the trajectory of interest rates and the capital markets environment. For this reason, there remains an abundance of capital on the sidelines waiting for valuations to adjust. Given the efficiency of the markets and following stabilization of spreads and valuations, investment activity should resume its robust pace as other fundamentals remain generally sound.

Last year, active investment sales brokers had to overcome several transactional challenges, notably dealing with six rate increases from March to December, an unprecedented pace of increases. However, to the surprise of some, the abundance of capital in the marketplace has helped keep cap rates compressed relative to financing rates, and within certain categories and lower price points, there is already a steady demand from investors in early 2023 as compared with the slowdown of the second half of 2022.