Outlook for liquidity strong despite challenges

An uncertain outlook and rising borrowing costs continue to inhibit transactions and require further price discovery in many markets. This uncertainty continues to impact investor sentiment, triggering a reluctance to transact and a heightened focus on monetary policy, underwriting and valuations.

Global investment volumes moderated in the fourth quarter of 2022 to US$203 billion, down 58% year-over-year – a significant decline from the all-time high set in Q4 2021. On a full-year basis, global volumes totalled US$1.03 trillion, a decline of 19% compared to 2021. A strong start to 2022, in the Americas in particular, propped up full-year volumes to exceed US$1.0 trillion for the third time in the last four years, despite the quieter close to the year. While market conditions were in many ways more aligned during Q4, mixed signals and divergent sector performance continue to be the norm in investment markets. 

Bid intensity moderated further during Q4 for the third consecutive quarter, as the bid-ask gap weakened and the variability of bids on opportunities widened across nearly all sectors. Liquidity continues to be impacted across asset risk profiles and sectors, with a notable impairment in office bidding dynamics. While debt markets remained active at the close of 2022, lenders were showing a reluctance to provide loans of scale and a preference for quality sponsors and assets. However, early signs of improvement are emerging, with less interest rate volatility, easing inflation rates and the stabilization of values likely to boost lender sentiment and activity.