CHICAGO—National commercial investment has moved steadily upward over the past four years, and in the third quarter volumes reached $66 billion, bringing the rolling annual volume to $270 billion, a post-crisis record, according to a new study by DTZ and based on data from Real Capital Analytics. The recent tendency among investors to focus more attention on secondary or tertiary markets also seems to have continued, since growth in eight top metro areas studied by DTZ was somewhat lower. Researchers from the firm expect that demand will remain strong but advise investors to consider moving away from the core areas to get higher returns.
The $66 billion represented an 8% increase over the second quarter. “Activity across the eight main US markets we monitor totalled $93 billion over the last twelve months,” company researchers note. “Growth of 17% on a year ago is below the national average as investors start to shift towards non-core markets.” Still, Manhattan continued to lead the way, attracting $25 billion in the past twelve months. And sales in San Francisco reached $18 billion in the same period, a 69% increase on a year ago.
“Activity in the key eight markets is being driven by cross-border investment,” says John Wickes, head of Americas research at DTZ. “Boston, Chicago and San Francisco benefited from stronger interest from overseas investors. This has pushed their total volumes up at high double-digit rates. Houston and Washington have moved into reverse reflecting weaker levels of cross-border activity.”
Domestic investors continue to dominate, but in the third quarter their activity diminished somewhat. However, cross-border investment grew from the rest of North America and from overseas. Significantly, overseas investors increased their acquisitions, taking rolling annual volumes to a new post-crisis record of $23.5 billion, a 20% boost over the same period in 2013.
“The size, attractiveness and liquidity offered by the key eight markets is very appealing to overseas investors,” adds Nigel Almond, head of capital markets research at DTZ. “International capital continues to dominate, but we have continued to see interest from Asian investors in particular from China, as well as growth from European sources, with German funds increasingly active alongside the Norwegian Government State Pension Fund.”
GlobeSt.com will present more details from Almond and Wickes tomorrow. Kasia Sielewicz, a co-author of the report, adds that the researchers “expect demand for US commercial real estate to remain strong supporting further volume and price growth.” Furthermore, they believe that the majority of markets will remain attractively priced due to the low interest rates. However, “with the prospect of rate rises in the future, this attractiveness will not last.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
