San Diego investment activity slowed in the first half of 2017, dropping to the lowest total sales volume since mid-2013. Although the second half of the year roared back, the slow down in the first half of the had a lasting impact. Despite the overall slowdown in activity, however, deal volume in the market closed 2017 above the 15-year annual average $4.7 billion 15-year annual average, according to research from Cushman & Wakefield. To find out more about the impact of the slowdown at the start of the year and expectations for 2018, we sat down with Jolanta Campion, director of research at Cushman & Wakefield, and Rick Reeder, executive managing director at the firm.

GlobeSt.com: What drove the slowdown in San Diego capital markets activity in 2017?

Jolanta Campion and Rick Reeder: While San Diego's commercial real estate investment sales volume across office, industrial, multifamily and retail properties $10 million and greater did slip a bit to a revised $6.1 billion in 2017, recently re-stated in our Q417 report, compared to $6.7 billion and $6.5 billion in 2016 and 2015 respectively, total annual deal volume was still well above the region's 15-year annual average of $4.7 billion.
The reduction in sales volume across all product types in San Diego in 2017 can be attributed to the cautious approach taken by investors who were uncertain in the future, especially early on in the year, along with heightened investor selectivity met with a scarcity of market supply. At the start of last year, many sellers felt the markets were imbalanced subsequently restricting the amount of properties for sale. Today, however, we are already seeing more sales opportunities in the market to begin the year that should help generate comparatively stronger activity in 2018 as institutional investors come off the sidelines. The last several months have brought much more clarity, which has enabled sellers to feel more confident in bringing their product online at good pricing. Additionally, some sellers are also anticipating a limited window with the expectation interest rates will continue to climb.