According to Real Capital Analytics, Commercial property sales totaled $94.8b in Q1’17, down 18% YOY. The apartment sector posted the largest pullback among the sectors and only industrial investment sale activity logged a YOY increase.
The last year and a half are proof that commercial property transaction volume cannot keep climbing at double-digit rates forever. An end in the rapid pace of sales though is not the same thing as saying that the market will suffer a rout and that prices will collapse. A pullback from the high level of portfolio and entity-level sales seen from Q4’14 to Q1’16 has continued to echo through to drive lower transaction volume in Q1’17. These megadeals had represented 31% of all transaction activity in that year and a half period but only represented 23% of all activity in Q1’17. Megadeal activity fell 38% YOY in Q1’17 on sales of $21.9b. Single asset transactions fell 10% YOY in Q1’17 on sales of $72.9b. Again, these levels are elevated. Even though the market is posting double-digit declines in sales volume, levels are only settling back to the averages seen just ahead of the recent boom. Across all first quarter investment periods from ‘01 to ‘17, Q1’17 comes in at the #5 position. Deal activity was also 41% higher than the average pace of sales seen in a Q1 period. The apartment sector posted the sharpest and most surprising pullback across all property sectors in Q1’17. Deal volume fell 35% YOY though single asset sales held up better, falling only 15% YOY. The industrial sector was the strongest sector in Q1’17 in that it actually had positive growth in sales volume. Activity here grew 3% YOY on sales of $13.9b, with a diverse pool of investor types acquiring assets.
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