State of Market Discussion

National Office Investor/Operator - Focused on institutional deal sizes ($150mm+) in major MSAs. My first couple bullets are purely what we're seeing in the office space but candidly, many of the below points are relevant across asset classes. Curious to hear what others are seeing. Things definitely aren't great but we're hanging in there. Ultimately, office operators in the trophy/AAA space will  do just fine as the space has really become a tale of two cities.

• Capital markets are slowly significantly - with exception of a few special situations, majority of deals being pulled from the market, starting to see deals financed in 2018/2019 in major MSAs where bids are barely above in-place loan balances. Core arena is being hit the hardest with NNN long-term leased assets effectively being hosed in terms of valuation. Investors don't seem to want to catch a falling knife in the core space. For those who read the real estate alert, there's been a few examples of these NNN assets that have been hit hard but more are to come in the next 6-12 months. Brokers seem to be scrambling to figure out pricing as much as buyers are. Case in point would be a broker speaking confidently on price guidance on a Monday, only to backtrack and revise 5-10% lower 2 weeks later. We're seeing this across the board as ballooning interest rates, a shrinking liquidity pool, deteriorating fundamentals, and investor skepticism surrounding the asset class all continue to make deals both extremely hard to pencil at pre-reset levels and hard to sell to IC in the current climate. 
• Cap rates are expanding significantly - We're starting to get debt quotes with rates starting with a 5 in front for moderate leverage and a 6 for higher leverage debt packages. As expected, cap rates are beginning to adjust substantially although limited comps have actually printed. We're seeing guidance blow out 100-150bps for processes that got underway prior to February. Main and main assets that historically would've traded for a high3s/low 4s cap in-place are being guiding to mid 5s. The idea of a 4 cap urban office building seems all but dead going forward. 
• Liquidity is starting to dry up - We're hearing more and more lenders completely on the sidelines for office. We're hearing that liquidity is drying up in general but this seems to be more relevant for office assets. Additionally, this seems to not only be a factor of interest rates and debt pricing but an overall lack of clarity/acceptance on what true market clearing valuation is in terms of stabilized office. Lack of liquidity will ultimately be a massive tailwind for national operators/investors with programmatic debt relationships.