Rising rates remained a defining theme in the second quarter of 2023, with the 10-year Treasury and SOFR both climbing further, though signs of moderating consumer inflation and falling energy costs offered some counterbalance. M&A activity continued to soften amid a risk off financing environment and a persistent mismatch between buyer and seller valuation expectations, even as an attractive arbitrage between business and real estate multiples kept sale leaseback economics compelling. With more than half of non-investment grade debt in the U.S. and Europe on floating rates, rising benchmark rates made the fixed cost of capital offered by a sale leaseback increasingly attractive, a dynamic reinforced by a surge in domestic manufacturing construction spending tied to the CHIPS Act.
