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Signs Point to Increased Transaction Volume in 2025

Valuation professionals look to the REIT markets and their reflection of bid-ask spread to anticipate next year’s transaction volumes.

By Eric Enloe, Partner Valuation Advisors and Brandon Nunnink, CFA | December 30, 2024 at 04:45 AM

Despite the uncertain economic outlook for 2025, one metric shows signs of improvement: transaction volumes. After two years of decline, indicators point to increased transaction volume over the coming year.

The decline in transaction volume can be attributed to federal interest rate increases, but was slow to materialize. While the Federal Reserve started raising rates in March of 2022, relatively slow initial rate hikes and a lag in associated impact on deal-making resulted in 2022 transaction volumes equal to almost twice the pre-Covid transaction volume rate. Industrial and Residential markets traded more than 220% of the average 5-year pre-Covid transaction volumes in 2022, while Retail real estate transacted at 168% of the pre-Covid rate. Only Office transactions slightly lagged pre-Covid average volumes at a 96% level. Overall, 2022 exhibited volumes equaled 172% of pre-Covid levels across the four main property sectors; however, this changed quickly in 2023.

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