U.S. commercial real estate investment volume increased 55.6 percent year over year in the first quarter of 2022 reaching $170.8 billion, according to Newmark’s first-quarter U.S. capital markets report. The total sales volume was the largest first-quarter volume on record, surpassing the peak volume in 2007. Low interest rates, demand for alternative property types and fast-growing Sun Belt markets were major contributors to the increase.
Dallas led all markets with $12.6 billion in investment volume, up 119 percent year over year. It was followed by New York, Los Angeles, Miami, Phoenix and Washington, D.C., respectively. The major markets were attractive due to trophy office product and a more positive retail and hospitality outlook.
Las Vegas, up 300 percent year over year, had the highest annual percentage gain of the 30 largest investment markets nationwide. Vegas had the largest transaction of the quarter, a $4 billion acquisition by VICI Properties of the land and real estate assets of the Venetian Resort Las Vegas and the Venetian Expo and Convention Center Las Vegas from Sands. Two markets – Boston and San Francisco – registered declines compared with the prior year.
Multifamily was the most sought-after property type, with $63 billion in sales during the first quarter.
Higher than expected inflation is expected to favor property types that typically have shorter lease terms, such as multifamily and self-storage. Other property types that typically favor long-term leases, such as industrial, attracted premium pricing with shorter lease terms remaining as buyers can increase asking rents to take advantage of rental growth and inflation.
Conversely, triple-net leased properties that have been coveted over the past two years due to steady returns amid a low interest rate environment are at the highest risk of impact from inflation. The report notes that these properties have the longest lease terms at an average of 10.3 years, and lease escalations are typically fixed, although they could be tied to the Consumer Price Index.
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