More CRE Deals Coming In Second Half Of '22, PwC Predicts

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Despite mounting economic headwinds, commercial real estate deal volume is expected to remain high in the second half of 2022, according to PwC's midyear outlook on CRE deals.

Nontraded REITs with capital to deploy from their sizable war chests and investors recapitalizing existing property-oriented funds will continue to fund deals moving into the third quarter and beyond, PwC predicts.

High sales volume for the rest of this year extends the trend seen since late 2021, the report points out, and as deals accelerated in the first part of this year.

During the first three months of 2022, PwC reports, total U.S. investment sales volume spiked 68% compared to the same period in 2021.

Investors have been on the prowl for grocery-anchored retail in particular, driving the transaction volume in Q1 2022 for retail by 104% compared with the first quarter of 2021. Grocery-anchored retail assets have "proven resiliency, coupled with consumer appetite for experiential in-person brick-and-mortar retail therapy," the report notes.

Hospitality investment sales deals have also been hot, with transaction volume up 101% year-over-year in Q1 2022, driven by the recovery seen in the lodging industry, especially among leisure-oriented properties.

Industrial deals didn't increase quite as much over the last year, but investors are still game for the assets. The industrial sector saw a transaction volume increase of 76% during Q1 2022 compared with last year.

"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," the report says.

PwC also forecasts that niche sectors will interest investors more in the days ahead, calling them "cornerstones" of real estate investment activity. Such niches include cold storage, data centers and life sciences.

Student housing is also a hot commodity. On Tuesday, investor Harrison Street acquired seven student housing properties totaling 4,500 beds for $725M from KKR & Co.

“As cap rates of traditional multifamily assets push to new record lows, the relative yield opportunity offered by student housing may further pique investor interest,” MSCI said in June, as reported by Bloomberg.

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