Commercial real estate capital markets hit a speed bump in April, one of the first signs that the macroeconomic climate is weighing on investors after a burst of activity at the start of the year helped brokerages like CBRE post banner results in the first quarter.
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Total CRE sales volume was $24.7B in April, down 33% from the prior year and the first year-over-year decline since June, according to MSCI’s monthly U.S. Capital Trends report. The falloff in activity marks a sharp reversal from the 27% growth in transaction volume across the first quarter.
Analysts for JPMorgan Chase called the results an “underwhelming start to the quarter” and said that interest rates had become the central focus. The upward march of the yield for 10-year U.S. Treasury bonds has helped push spreads out by roughly 10 to 15 basis points, and expectations of rate cuts from the Federal Reserve have effectively evaporated. Taken together, the cost of debt is increasingly a hurdle for deals.
“When combined with the big moves in interest rates in the last few weeks, capital markets are turning into a potential risk looking into 2H for which continued strength is expected,” the analysts wrote.
Yields for 10-year Treasuries have risen rapidly since February and hit 4.6% Tuesday before sliding by 9 basis points in early trading Wednesday. The bonds, which have jumped as the U.S. conflict with Iran ripples across energy markets and the economy, are trading around their highest point since January 2025 and are approaching rates not seen since 2023.
Rising yields are impacting deal flow, but there is a wide range of opinions about how much they are sapping activity.
Debt remains widely available, and lenders are fighting for strong deals in a crowded marketplace, which some argue has pulled down spreads in recent months to the point where the market can absorb an elevated Treasury yield.
Other investors see the 10-year’s run-up past 4.5% — an oft-cited ceiling in recent years to avoid widespread distress — as creating real challenges in the marketplace, particularly for the more than $930B in debt underwritten during a period of exceptionally low interest rates that is set to mature this year.
“We aren’t just approaching the danger zone for commercial real estate — at a 4.60% ten-year Treasury, we are already living in it,” Paul Rahimian, CEO of real estate credit investor Parkview Financial, told Bisnow in an email this week.
Sales volume was down across nearly all sectors in April. Multifamily performed the worst, with apartment sales volume in April half that of the prior year. Hotel trades also slid 35% to $1B in activity for the month, while office, retail and industrial asset sales volume declined by 15% to 20%.
Senior housing and healthcare was the only asset class with significant year-over-year sales growth, with transactions up 13% to $1.3B in April. The only other segment to see forward momentum was suburban office, where sales ticked up 6% to $3.8B for the month.
Despite the slowdown, brokers remain optimistic, and there has been no pullback in sentiment, the JPMorgan analysts wrote.
The average capitalization rate across all transaction types was 6.6% in April, down 4 basis points from the prior month, according to MSCI. Office cap rates ticked up 8 basis points month-over-month to 7.4%, industrial cap rates slid 35 bps to 6.4%, retail cap rates climbed 13 bps to 7.05%, and apartment pricing was flat at 5.7%.
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