Commercial real estate investment fell sharply in Q3 2020 from the pace of activity experienced a year ago. Real Capital Analytics (RCA) reports the dollar volume of properties changing hands in Q3 2020 dropped 57% from a year prior with transaction volume standing at $68.4 billion.
But RCA notes there’s reason for optimism too. Conditions aren’t seeming to get any worse and indications suggest improvement is not far-fetched.
“The headline figures actually understate the strength of the quarterly rebound, given the rippling aftereffects of significant portfolio activity in Q3 19,” wrote RCA’s Jim Costello in the report. “In those happier days without masks, GLP sold two massive portfolios of industrial properties to Blackstone-controlled entities. Those deals drove more portfolio activity in a single quarter than the market had ever seen. Looking at the sale of individual assets in Q3 20, sales were down only 49% YOY. A down quarter for sure, but not as bad as Q2 20.”
Investment activity actually increased in Q3 relative to Q2 by a larger margin than would normally be expected because of seasonal trends, too. Deal volume in the third quarter is typically higher than what is seen in second quarters, a pattern that usually follows the end of a slower summer period. Deal volume in Q3 20 was 37% higher than that of Q2 20.
RCA points out the apartment sector was still the largest component of U.S. commercial real estate investment for the quarter, even with sales down 51% from a year earlier. Costello writes, “That pace of decline is the shallowest across the major property sectors, though if we look only at individual asset sales, the industrial sector performs the best, with volume down only 25% YOY. The leader for year-over-year growth across all investment types was development site sales activity, up 21%.”
RCA notes there doesn’t seem to be room for doom and gloom within the CRE property markets, either. The data firm points out properties are trading, though distressed sales have yet to surface in any big way, and sellers are still achieving premium pricing on some assets.
Dennis Kaiser is Vice President of Content and Public Relations for
Connect Commercial Real Estate. Dennis is a communications
leader with more than 30 years of experience.
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