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CRE’s Liquidity is on the Decline Again

National  + Weekender  | 

With all of the capital chasing what often appears to be too few investment opportunities, one key metric is on the decline across most U.S. commercial real estate markets: liquidity. Real Capital Analytics reported that of the 55 U.S. markets the firm tracks in its RCA Capital Liquidity Scores, 35 registered lower liquidity scores at midyear.

Compared to what the industry saw in 2009 and 2010, when illiquidity reached Himalayan peaks, the downward trend isn’t quite as steep. Yet RCA data point to a recent pickup in liquidity declines after holding comparatively steady for most of 2017.

“Headline volume has been boosted by massive multibillion-dollar portfolio transactions and company buyouts,” writes RCA analyst Elizabeth Szep. “Under the surface though, other indications of overall market health and liquidity are waning.”

Those nine-and 10-figure portfolio sales and entity-level deals may make news, but at the same time they’ve translated into ”a drop in the number of active buyers—an input in the construction of the liquidity scores—over the past several years,” Szep explains.

At midyear, six of the U.S. markets RCA tracks showed neutral growth, between -1% and 1%, in their liquidity scores compared to a year ago, Thirty-one markets posted a decline deeper than 1% , while 18 markets posted an increase greater than 1%.

Szep notes that the drop-off in liquidity runs across market tiers. “Top tier cities like Boston [pictured] are posting liquidity declines, and secondary markets like Charlotte are contracting as well,” she writes. Likewise for Austin, Miami and the East Bay.

Similarly, RCA’s scoring points to variation among the markets where liquidity increased. “Primary markets like the D.C.-Virginia suburbs are posting higher liquidity, and so are select second tier markets such as Nashville and Minneapolis,” writes Szep.

That being said, most of the liquidity gains are at lower percentages, more so than the drop-offs in liquidity in the cities where it has declined from a year ago.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Sale/Acquisition
  • ◦Sale/Acquisition