U.S.

Capital Markets Snapshot | Q2 2022

Capital Markets | Q2 2022

U.S.
Market Snapshot
U.S. Capital Markets Snapshot | Q2 2022

Overview
Another record-breaking sales quarter is in the books. With $178.8 billion traded, second- Quarterly Pricing Quarterly Pricing
Direction Forecast
quarter volume was up marginally from Q1 and 18% from one year prior. In addition, the
past four quarters have seen a combined $905.2 billion in sales. However, it’s important Multifamily
to note that the market is at an inflection point. Buyers and sellers are still adjusting to
higher borrowing costs. Once the market settles, investors will be able to price the cost of
Office
debt more confidently. Persistent inflation, geopolitical risks, and a slowing U.S. economy
are headwinds investors are grappling with today. However, job growth has been resilient,
supporting the potential for a soft landing economically. Industrial

Retrades are becoming commonplace. As the
Federal Reserve increases the Federal Funds rate to
combat inflation, the cost of debt has risen. The Fed
is walking a fine line in attempting to stabilize the
job market while thwarting inflation. Due to higher
capital costs, buyers have sought price discounts
as debt pricing is now above going-in cap rates in
many instances, creating negative leverage. Some
buyers are retrading for sport, knowing that sellers
face uncertainty in restarting the marketing process
on assets. The result is an environment of rising cap
market movement, and today, all asset classes Retail
face varying challenges. Investors are still heavily
focused on multifamily and industrial. With elevated
Hotel
inflation, longer-term leased assets are out of favor
as investors look to capture rent upside with short
weighted-average lease term deals, particularly on the
industrial side. Capital is on the sidelines waiting for
Sales Volume
interest rates and markets to re-adjust.
Sales Volume
While the market is rebalancing, capital remains
plentiful. Debt is readily available, as is equity capital. $1,000
As a result, distress is not expected to be widespread, $900

4Q Rolling Sales Volume (BN)

rates and reduced proceeds.
as the underlying fundamentals of the capital markets $800
On a year-over-year basis, pricing is still up across (i.e., underwriting standards) are vastly stronger today $700
asset classes. However, on the ground, prices have than during the Global Financial Crisis. $600
fallen. It takes time for transactional data to reflect $500
$400
$300
David Amsterdam $200
Aaron Jodka
President, U.S. Capital Markets and $100
Director of Research, U.S. Capital Markets
Northeast Region $0
Aaron.Jodka@colliers.com
David.Amsterdam@colliers.com

18Q2

19Q2

20Q2

21Q2

22Q2
+1 617 330 8059

17Q2
+1 212 716 3556

Sources: Colliers, Real Capital Analytics

 U.S. Capital Markets Snapshot | Q2 2022

Multifamily
Multifamily investing dominated Q2, accounting for nearly half of all sales volume. $86.3 Billion
Quarterly Volume
However, cap rates are adjusting, with borrowing costs now above going-in cap rates.
High homeownership costs and limited housing construction point to continued strong
fundamentals for this asset class.

Sales figures show that price growth remains strong,
though slowing somewhat, and volume set a new Q2
record, up 42% from last year. Meanwhile, cap rates
have begun to rise.
For dealmakers, trades are much more challenging to
With massive amounts of capital still chasing 23.7%
multifamily, as this asset class goes, so goes the Year-over-year Price Change
broader market. Rents are rising at a healthy clip,
occupancies are strong, and single-family mortgage
rates remain elevated, keeping many potential buyers
in the rental pool longer. There are many reasons to be

Mount Auburn Portfolio

execute. Buyers are retrading regularly, mainly due bullish on multifamily, but sales metrics are adjusting,
to higher borrowing costs, yet sellers are hesitant to with cap rates rising and per-unit prices falling.
accept lower prices given the strength of asset-level $2.4 Billion | 8,344 Units | $292,000 per Unit
performance.

Record-Setting First Half Sales Volume Markets ($BN)

Seattle, WA
Top Markets
$3.4 Indianapolis, IN Dallas, Texas | Phoenix, Arizona | Houston, Texas
$1.8
Boston, MA
$2.3

Northern New Jersey, NJ

Las Vegas, NV $2.0
$2.3
Philadelphia, PA
$2.2
What to Watch
Los Angeles, CA Raleigh/Durham, NC Volume Gains in Sun Belt Metros |
$5.4 $3.0 Multifamily Deliveries | Capital on the Sideline
Charlotte, NC
San Diego, CA $3.5
Nashville, TN
$2.0 $3.6
Atlanta, GA
$7.8
Phoenix, AZ
$8.1 Orlando, FL Will Mathews | Multifamily Lead
Austin, TX Dallas, TX $3.8
$3.9 $12.6 U.S. Capital Markets Board of Advisors
San Antonio, TX Miami, FL Will.Mathews@colliers.com
Houston, TX
$2.5
$3.4 $8.0 Tampa, FL +1 404 877 9285
Sources: Colliers, Real Capital Analytics
$3.3
U.S. Capital Markets Snapshot | Q2 2022

Office
Office sales pulled back in Q2. Volume has slumped in back-to-back quarters, though $24.8 Billion
Quarterly Volume
the Q4 to Q1 drop is typical and expected. Volume is down 9% compared to last year, and
transactional cap rates are up slightly. Price growth is also slowing, up 1.4% in Q2, the most
modest gain of all major property types except hotel.

Office investors are pumping the brakes. In the
second quarter, volume fell by nearly 25% and was
lower than the typical Q2 volume between 2014-19
by 25%. Volume is down across CBDs and suburbs, as
well as single-tenant assets. The market is in a period
of readjustment.
Investors seek bargains, and sellers are unwilling to
accept fire-sale prices. As a result, deals are being
pulled off the market, with bids falling short of earlier
expectations. Although pricing has cooled, life sciences
is still a popular target for office investors.
Sales volume is slumping in many of the nation’s tech- 10%
centric markets, including Boston, San Jose, Austin, San Year-over-year Price Change
Francisco, and San Diego. However, there are bright
spots in the market. Dallas and Boulder set first-half
records for sales volume. In the case of Boulder,
BioMed Realty acquired the 22-building Flatiron Park
for $625 million. In addition, Manhattan, Los Angeles,
Madison Centre
and Chicago, the nation’s three largest population
centers, have seen sizeable year-over-year sales
Seattle, Washington
volume pops. $729.8 Million | $959 per SF | 761,000 SF

Top Markets
First Half 2022 Sales vs. 2021
First Half Sales 2022 vs. 2021 Manhattan, New York | Los Angeles, California |
Seattle, Washington
Boston
San Diego
San Francisco
East Bay
San Jose
What to Watch
Appetite for WALT | Flight to Quality |
Houston
ESG Investing
Manhattan
Chicago
NYC Boroughs
Boulder
Frank Petz | Office Lead
-100% 0% 100% 200% 300% 400% 500% 600% 700% 800%
U.S. Capital Markets Board of Advisors
Volume Change Frank.Petz@colliers.com
+1 617 330 8123
Sources: Colliers, Real Capital Analytics
U.S. Capital Markets Snapshot | Q2 2022

Industrial
Industrial sales volume remained strong through Q2. A record-breaking $35.2 billion in sales $35.2 Billion
Quarterly Volume
masks a slowdown in the marketplace. Volume was up by 8% year-over-year, a more modest
expansion than in recent quarters. Low cap rates are making deals harder to pencil, and
pricing is adjusting in real-time.

On paper, industrial continues its epic run of record-
breaking sales volume. The past four quarters posted
nearly $200 billion in sales and all-time high sales per
square foot metrics. Price appreciation is the strongest
of all asset classes. However, cap rates did show signs
of upward pressure.
levels, 2%-3% rent bumps are not attractive to buyers. 26.9%
Instead, they are targeting short-term leased assets, Year-over-year Price Change
intending to capture the recent run-up in rents.
Buyers are facing the challenge of higher borrowing
costs in a low cap rate environment. As a result, many

Long-term leased assets, which were top investment

deals have repriced, or bids have come in below
original guidance. That said, these figures are still near MDH Portfolio
targets coming out of the pandemic, are now seen all-time highs, and buyers are out there. $1.3 Billion | 47 Properties | 9,500,000 SF
as less desirable. Given today’s elevated inflation

Markets With First Half Volume Up 2X+ Top Markets

Dallas, Texas | Los Angeles, California |
Chicago, Illinois

DC Virginia Suburbs
What to Watch
+549%
Negative Leverage | Delivery Schedules|
Charlotte, NC Import Volume
+105%

San Diego, CA Memphis, TN

+111% +292%

Orlando, FL
+352% Michael Kendall | Industrial Lead
Fort Lauderdale, FL U.S. Capital Markets Board of Advisors
Dallas, TX
+122% +200% Michael.Kendall@colliers.com
+1 949 724 5545
Sources: Colliers, Real Capital Analytics
U.S. Capital Markets Snapshot | Q2 2022

Retail
Retail leads the pack in sales growth, with a 46% boost in Q2. It is also one of the only property $22.6 Billion
Quarterly Volume
types to post an increase in sales volume quarter-over-quarter. These numbers are well ahead
of pre-pandemic levels, indicating that interest in retail properties is back. In addition, going-
in cap rates are higher, preventing some of the challenges facing industrial and multifamily.

Retail sales volumes are bouncing back across
markets. Of the top 25 markets for year-to-date sales
volume, only one, Phoenix, is not reporting solid
gains compared to the first half of 2021. In fact, eight
markets set new first-half volume records: Sacramento,
Seattle, East Bay, Boston, San Jose, Orange County,
Palm Beach, and Minneapolis.
Relatively higher cap rates mean retail transactions
face less pressure than other property types. However,
as interest rates have increased, and with the Federal
Reserve expected to continue rate hikes in the face of
stubborn inflation, knock-on effects are likely to make 18.8%
their way to retail. For example, single-tenant retail and Year-over-year Price Change
drug store sales volume is down more than 20% year-
over-year. Cap rates for these properties are among
the lowest within the asset class. Likewise, the shops
category is down 18%.
Gravestar Portfolio
Overall, the U.S. consumer remains healthy, with a low
unemployment rate, and increased retail sales in June.
Acquisition
This strength helps support retail fundamentals and $390 Million | 9 Properties | 701,000 SF
market liquidity.

Retail Volume Q2 Over Time

Top Markets
Retail Q2 Volume Over Time Los Angeles, California | Dallas, Texas |
Miami, Florida
$25

$20
What to Watch
Q2 Volume (BN)

$15 Consumer Sentiment | Inventory Discounting |

Cash-out Refinancing

$10

$5
El Warner | Retail Lead
U.S. Capital Markets Board of Advisors
El.Warner@colliers.com
+1 949 724 5690
Sources: Colliers, Real Capital Analytics
U.S. Capital Markets Snapshot | Q2 2022

Hotel
Hotel sales volume is showing signs of cooling. Second-quarter volume decreased $9.7 Billion
Quarterly Volume
year-over-year, mainly in the absence of a transaction equivalent to Blackstone/Starwood’s
2021 acquisition of Extended Stay America. In addition, quarterly volume fell 23% from Q1.
According to RCA’s latest pricing series, hotel is the only asset class posting quarterly declines.

Hotel sales metrics paused in Q2, and the lack of
massive portfolios is skewing data. However, single
asset sales were up 2% this quarter compared to last
year. Like retail, hotel’s going-in cap rates are higher
than other property types, giving this asset class
breathing room in a rising interest rate environment.
Plus, fundamentals have been on a tear, with many
properties posting record RevPAR and room rate figures.
Hotel cap rates remain historically low and stable in
spite of rising interest rates. Copious equity is chasing
acquisitions depressing IRRs. Due to challenging new
development metrics, investors seek operating
Passenger Volume vs. 2019 Levels
120%
hotels at pricing below replacement costs. 12.2%
Year-over-year Price Change
Nationally, capital has been heavily concentrated in
growth corridors across the Sun Belt. That is playing out
in hotel volume as well. Through the first half of 2022,
six markets have posted all-time sales records, including
Dallas, the top investment market in the country. Austin, Trump International
Nashville, Tampa, Fort Myers, and Napa round out the
list. Drive-to destinations remain popular, though air
Hotel Washington, D.C.
travel has increased dramatically, bringing travelers to a $375 Million | 263 Rooms
wider array of destinations. Since the beginning of June,
passenger volume is at 89% of 2019 levels, on average,
per TSA checkpoint data.
Top Markets
Dallas, Texas | Manhattan, New York |
Austin, Texas

100%
Passenger Volume

80%

60% What to Watch

40%
Airport Travel Counts | Domestic vs. International
Travel | Hotel Cap Rate Movement
20%

0%

Rich Lillis | Hotel Lead

U.S. Capital Markets
2022 2021 Average 2020 Average* Rich.Lillis@colliers.com
* 2020 average based on April 1 onward +1 561 353 3640
Sources: Colliers, Transportation Security Administration
Contacts View our other recent
Market Snapshots
For more information please contact: by clicking on the
images:
David Amsterdam
President, U.S. Capital Markets and Northeast Region
David.Amsterdam@colliers.com APAC
+1 212 716 3556

Aaron Jodka Capital Markets & Investment Services | Q2 2022

Asia Pacific
Director of Research, U.S. Capital Markets Market Snapshot

Aaron.Jodka@colliers.com
+1 617 330 8059

EMEA
U.S. Capital Markets Board of Advisors EMEA Capital Markets Snapshot | Q2 2022

Capital Markets | Q2 2022

EMEA

Will Mathews Frank Petz Michael Kendall Market Snapshot

Multifamily Lead Office Lead Industrial Lead

Will.Mathews@colliers.com Frank.Petz@colliers.com Michael.Kendall@colliers.com
+1 404 877 9285 +1 617 330 8123 +1 949 724 5545

El Warner Jeff Black Peter Nicoletti

Retail Lead Debt & Equity Lead Portfolio Sales Lead
El.Warner@colliers.com Jeff.Black@colliers.com Peter.Nicoletti@colliers.com
+1 949 724 5690 +1 617 330 8049 +1 212 716 3620

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