• Volume totaling $344 billion across the major asset types was down 53% compared to 2022.
• Sales haven’t been this low since 2013, both annually and quarterly.
• Activity in Q4 was the weakest of the year, which is atypical. However, December did post monthly gains.
• Multifamily volume fell the most of all asset classes, though it led in total sales.
• The Fed’s 2024 pivot should set the stage for a better year overall.

For many investors, 2023 was a year of challenges, with volatile interest rates, a banking crisis, geopolitical conflict, and lenders extending and modifying loans. Although sales volume reached $344 billion, it dropped by 53% compared to 2022, marking the second consecutive year of declining sales. Activity was the weakest since 2013, and the typical year-end volume pop failed to materialize. The Fed’s plan to pivot in 2024 and lower interest rates was a welcome year-end gift to the market and boosted investor sentiment.

Colliers Insight

Aaron Jodka

“Hospitality witnessed a significant shift as Manhattan claimed the top spot with a remarkable 131% surge in volume.”

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Office
Since 2004, there have only been two weaker years for investment sales volume: 2009 and 2010. For CBDs, only 2009 posted lower activity. Overall, $52.0 billion transacted on the year. Cap rates continued to move upward, with MSCI’s rolling three-month cap rate hitting 7.4% at year-end, the highest since 2012. Given the challenges in the marketplace, it is unsurprising that none of the top 25 markets for sales posted an annual increase. Tampa had the best relative showing, down 20% on the year.

Industrial
The pullback in industrial volume felt harsh in 2023, though overall, it was below average. Volume did decline in the last three quarters of the year. Compared to pre-pandemic years, quarterly volume aligns with 2015-2019 levels. Cap rates are up, averaging 6.3% on a three-month moving basis, per MSCI. The top five markets for sales remained the same in 2023, with Los Angeles and Inland Empire taking the top two spots, pushing Dallas to third. Charlotte posted the best relative volume on the year, down just 9%.

Multifamily
Multifamily sales activity has faced the harshest adjustment, given the euphoria in the market, which sent volume to unprecedented highs. It is still the most liquid asset class, with $119.0 billion transacting in 2023. Cap rates are rising here, too, with the three-month transactional cap rate at 5.5% at year-end. San Francisco was the only market within the top 25 to post annual sales gains. It climbed the list to the 24th spot, up from 54th the previous year. Dallas remains number one, as it has in recent years, while Chicago and the New York City Boroughs moved up the ranks, coming in fourth and fifth, respectively.

Retail
Of all asset classes, retail posted the lowest decline in volume, at 38%. This drop was primarily driven by shops and entity trades, down 11% and 13%, respectively. Cap rates rang in at 7.1% at year-end, reminiscent of 2014 figures. Unlike other asset classes, two markets within the top 25 for sales set all-time highs: Westchester, NY, and Stamford, CT. Los Angeles remains first, while Manhattan, with volume up 32% on the year, ranked fourth, up from 16th the year before.

Hospitality
Just under 190,000 rooms traded in 2023, the lowest figure outside the pandemic since 2011. Within the top 25 sales markets, there was substantial movement. Manhattan vaulted to the number one spot, with volume up 131%, followed by Fort Lauderdale, up 58%, and San Antonio, up 130%, an all-time high. The New York City Boroughs also performed strongly, with volume up 86%. Los Angeles fell from the second spot to 18th, with volume down 82% on the year.