CRE Small-cap Equity Market Ends Year with Slight Increase: Boxwood Means

Originally published on January 15, 2023 by Randy Fuchs for Boxwood Means.

The total market dollar value of small-cap CRE rose marginally in 2022 headlined by a shift in opportunity and risk for investors and lenders. Though the market’s total equity valuation in December testifies to this domain’s inherent resilience, sinking deal volume, decelerating prices and rising cap rates over the second half of the year curbed the market’s considerable expansion following the Covid-19 pandemic.

Total equity market value increased by a modest 1.9% or roughly $65 billion YOY to an estimated $3.5 trillion according to research by Boxwood Means. Among the four principal property types, the fundamentally strong industrial sector outperformed with an 8.3% gain in dollar market value followed by the supply-challenged multifamily sector with an increase of 1.4%. Valuation estimates for office (0.4%) and retail (-0.8%) were relatively flat over the previous 12 months1.

Despite the relatively flat growth during 2020, it’s noteworthy that the total dollar value of small commercial and multifamily properties soared 40.1% since the economic shock wave of the pandemic in mid-2020 and thereafter characterized by a resurgence in deal volume and double-digit growth in asset prices.

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