A record level of merger activity helped boost August commercial real estate sales volume, masking a more measured pace of individual asset sales.

Total sales volume in August was $107B, boosted by $70B in M&A-type sales, according to MSCI. Megadeals lifted transaction volume 127% year-over-year in August, but total sales excluding M&A were down roughly 21% compared to last year.

M&A deal volume was at a record pace for a single month in August, and the data reflects a highly liquid market, but one where the expansion of deal volume is slowing, MSCI analysts wrote. 

Rising interest rates and the shifting capital markets environment were unlikely to have scuttled many deals in August but could put pressure on activity in the months ahead, analysts at JPMorgan Chase wrote in a note to investors.

“The elephant in the room is the change in rates and what happens next in CRE capital markets. In our view, we think 3Q should ultimately be okay from a sales volume point of view versus expectations,” the analysts wrote. “The leg up in interest rates both on the long and short end of the curve occurred later in the quarter, and we think simply from a transaction timing point of view there was likely little impact on deals in motion.”

Investors are adjusting to expectations that interest rates will remain elevated, but current costs haven’t derailed deals so much as they’ve slowed down decision-making, the analysts wrote. The multifamily sector, where capitalization rates are already relatively low, faces the most risk that elevated debt service costs could scuttle deals. 

Prices barely moved in August, with the RCA CPPI U.S. National All-Property Index up 0.1% from the prior year. 

The merger of AvalonBay Communities and Equity Residential to create a new REIT called Vivmark Residential with an enterprise value around $70B was the main driver of August deal volume, and lifted multifamily transaction volume for the month by 402% compared to last year. 

Industrial asset sales volume was up 14% year-over-year to $11.5B, and senior housing sales climbed 8%, but every other asset class saw volume slip. The biggest dip came from data centers, with no assets trading in August, followed by a 45% dip in hotel sales. Office, retail, hotel and development site sales volumes were all down compared to the prior year.

Despite the moderation in activity, year-to-date sales volume is up 53% from last year at $483B, driven by a 221% increase in portfolio and entity-level deals. Single-asset sales volume is up 12% through August compared to last year. 

M&A also helped drive sales volume in July, with the $74.4B total boosted by BlackRock’s $33.7B acquisition of Aligned Data Centers. 

The average capitalization rate across all transactions in August was 6.01%, down 80 basis points from the prior month.