Commercial real estate transaction activity continued its post-pandemic surge. During the first three months of 2022, total volume is up 68% compared to the same period for 2021.
So what happened? Most notably, transaction volume in the first quarter of 2022 for retail is up 104% versus the first quarter of 2021, due to a focus on grocery-anchored assets given their proven resiliency, coupled with consumer appetite for experiential in-person brick-and-mortar retail therapy. Hospitality is not far behind, with transaction volume up 101%, underpinned by the recovery seen in the US lodging sector, particularly in March of this year, and in contrast to the low levels seen in the first quarter of 2021.
Comparatively, the industrial sector saw transaction volume increases of 76% during the first quarter of 2022 versus the same period in 2021. E-commerce and just-in-case inventory stockpiling following supply chain challenges contributed to this growth, which we expect to continue for the next two years before the market potentially softens as it responds to the continued pipeline of additional space in excess of historical averages.
Meanwhile, transaction volume in the office sector was up 62% versus 2021 in the first three months of 2022, driven by a return to work and associated increases in leasing activity, which has resulted in positive net absorption. We expect activity to continue for recently constructed or redeveloped assets and/or assets with advanced ESG certifications, while older assets will experience headwinds.
Lastly, we expect transaction volume in the multifamily sector to remain strong given demographic shifts coupled with supply constraints. Activity is supported by attractive returns relative to risk, the ability to reset rents to market on a monthly basis and a progressively more challenging for-sale housing operating environment.
“Activity in Q1 of 2022 was consistent with our expectations. Moving forward, we see activity remaining robust as investors express their creativity and rotate to experiential opportunities to capitalize on an acceleration in services-related spending.”
Real Estate Deals Leader, PwC US
Real Estate Acquisitions Leader, PwC US