Money & Finance › Markets of the world › Commercial real estate markets: office, industrial, retail, apartments
CRE capital markets: deal volume and the cap-rate cycle
2021 peak; 2023 trough· Concept
Fact, law or dataA rule, statute, definition or measured number.
How many commercial properties change hands, and at what cap rates; sales volume swings far more than prices through the cycle.
See it on the Money & Finance map →How it works
US commercial property sales hit a record $809 billion in 2021 (MSCI Real Capital Analytics), fueled by near-zero rates. After the Fed's 2022–23 hikes, buyers needed higher cap rates (NOI divided by price) to cover 6–7% debt, while sellers resisted cutting prices. With bids and asks far apart, 2023 volume fell 51% to about $374 billion. Volume recovered gradually: first-half 2026 sales were $279 billion, up 23% from a year earlier. Prices adjust slowly because appraisals lag.
Why it matters
Sales set the comparables that appraisers and lenders rely on; when few buildings trade, values become guesswork and refinancing gets harder.
Think of it like
Like a frozen housing market: when sellers won't cut and buyers can't pay, sales stop before prices fall.
Facts, rules and data
MSCI Real Capital Analytics deal databases, Green Street's Commercial Property Price Index, NCREIF appraisal data, and broker cap-rate surveys such as CBRE's.
Debates and risks
Whether cap rates have fully reset to higher interest rates, or office values still have further to fall, is debated among appraisers and investors.
Connections (2)
▸CRE capital markets: deal volume and the cap-rate cycle roughly halved in 2023 after hikes in The federal funds rateFact, law or data
The connection
The Fed raised its rate from near zero to over 5% in 2022–23. Loan rates followed, so buyers' debt costs rose above many property yields, making deals unprofitable unless prices fell. Sellers refused to cut, so transactions dried up: US sales fell 51% in 2023 to about $374 billion (MSCI).
When and why
US-wide; hikes ran from March 2022 to July 2023, and deal volume bottomed in 2023 before recovering in 2024–26.
How we know
MSCI Real Capital Analytics transaction data, Fed rate decisions, and Green Street price indexes.
Debates and risks
How far rates must fall to restore 2021-style volume, and whether long-term Treasury yields matter more than the Fed's rate, is debated.
▸CRE capital markets: deal volume and the cap-rate cycle must recover to refinance the The CRE maturity wall and maturity defaultsMainstream view
The connection
A maturing loan is repaid by a refinance or a sale. Both need an active market: lenders want recent comparable sales to set values, and owners who must sell need buyers. With about $875 billion of commercial mortgages maturing in 2026 (MBA), a thin sales market forces extensions, paydowns or distressed sales.
When and why
US-wide, 2024–27, especially office loans made in 2015–21 at low rates and high values.
How solid is the link?
MBA loan maturity surveys, MSCI deal data, and Trepp data on maturity defaults.
Debates and risks
Whether recovering sales volume will absorb the wall, or lenders will keep extending loans and delaying losses, is debated.