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The rising cost of capital has markedly slowed investment activity across all sectors and deal sizes for the past three years. But has it affected larger deals more than smaller ones? The short answer? Generally, yes, but it depends on the property type.

To gauge the impact, we broke down the MSCI Real Capital Analytics database of trades by quartile instead of specific size ranges. This helped us account for the effect of property value declines on top-tier pricing.

For industrial, the volume decline for largest-deal quartile was only 7.3 percentage points more than for the smallest quartile. For multifamily, the gap was modestly more pronounced at 9.1 percentage points. The retail sector defied the trend all together with a steeper volume decline for the smallest deal quartile than for the largest.

The real outlier was the office sector, with a 15-percentage-point gap between the smallest and largest quartiles. This is not surprising as the well-chronicled challenges in securing financing for office buildings drove investors to prefer small, lower-leverage deals. Also, smaller, locally oriented tenants have arguably done a better job of preserving an in-person office culture than large occupiers, where remote work is more firmly entrenched.

As capital markets conditions improve, we expect an even starker difference between well-occupied, high-value office properties and underperforming secondary and tertiary assets. This should further encourage more trading in larger, top-tier assets.