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Transaction rose in the second quarter of the year from Q1’s 10 year low of 128 to a more modest 190 sales.  While still below the historical quarterly average in the mid 200’s, it’s a welcome sign in the market that buyers and sellers have been able to bridge the bid/ask gap and get deals done.  Anecdotally speaking, it seems that the initial shock of higher interest rates is giving way to acceptance of the new market reality and those that need to transact are finding a way to do business.


The average price per square foot for sales in Q2 2023 came in at $485, a 2% decline from Q1, but virtually unchanged from Q4 of 2022’s $488.  With three quarters of data now hovering at this level, it looks as though the damage from rising interest rates has been done and we’re heading along flat down about 9% from the peak in early 2022.  In a nod to inflation’s effect on pricing, the price per door number of $450K is actually up about 5% from the first 2 quarters of the year.


Income metrics have continued to feel the effects of constrained debt markets and higher interest rates.  The average gross rent multiplier (GRM) for Q2 2023 was 16.7, down .3 from Q1 and two full multiples (2X) from a year ago in Q2 2022.  Cap rates averaged 4.1% in the quarter, up 50 basis points from the same quarter last year.  Interestingly, pricing on an income basis is down about 11% according to these metrics, while pricing of the physical real estate hasn’t been as affected, a suggestion that rising rents have kept prices from falling further.


We’ve seen inventory slowly rise from a near 10 year low at the end of 2021 of barely above 300 active listings to about 530 average active listings in the second quarter.  Currently at a 10 year high, it’s tempting to predict further price pressures from the increased supply.  That said, we’re still significantly below the high 500’s we saw in the mid 2000’s and way below the average 1780 (!) active listings we experienced in 2008.

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