Source: RE Journals —
Law firm DLA Piper recently released its 2022 Year-End Real Estate Trends Report. One of the more interesting findings? Transactional volume handled by DLA Piper’s real estate group soared in the first half of 2022, nearly doubling the volume that the firm handled in the first half of 2021.
But in the second half of last year, the volume handled by the firm’s real estate group dropped dramatically, slowing to a pace more consistent with pre-pandemic levels.
What does this slowdown mean for 2023? We spoke with Boston-based Barbara Trachtenberg, partner of DLA Piper and co-vice chair of the firm’s real estate practice, about the trends report and what the commercial real estate industry might face this year.
Here is some of what she had to say.
We see in DLA Piper’s trends report that the transaction volume handled by your practice’s attorneys dropped in the second half of 2022. Do you think deal activity will continue to slow throughout 2023?
Barbara Trachtenberg: I was at the Real Estate Roundtable meeting in D.C. last week. This week we had our London real estate summit. People are generally thinking that at least the first quarter and maybe the first half of 2023 is going to be relatively slow for commercial real estate transaction volume, similar to what we saw in the second half of 2022.
But no one is sitting around saying, ‘This is going to be so bad.’ No one thinks that transaction volume will be stale forever. People are optimistic that after one or two more quarters the pace of transactions will pick up. They are confident about 2023. It’s not that nothing is happening. But 2021 and the first half of 2022 saw such a high volume of transactions that today feels slow by comparison. It’s not really that slow. It just seems slow after what we saw during the last year-and-a-half.
What caused the slowdown in transaction activity in the second half of last year?
Trachtenberg: The rising interest rates created some pricing issues, especially in the second quarter of last year. People were looking at purchase agreements that were enacted earlier in the year. Then, when they went to do their due diligence later in the year, they saw that the deals weren’t going to sketch out. Suddenly the cost of debt went up.
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