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Examining Y-O-Y Deal-Volume Patterns

IRVINE, CA—Slow starts to 2016 and 2017 for different reasons are responsible for lagging year-over-year CRE deal volumes, but this pattern should begin to reverse itself in 2018, Ten-X's Peter Muoio tells GlobeSt.com.

By Carrie Rossenfeld | carrierossenfeld | Updated on March 17, 2017

Peter Muoio Muoio: “Looking to 2018, expect a pick-up after two years of drop-off in transaction volume.”

IRVINE, CA—Slow starts to 2016 and 2017 for different reasons are responsible for lagging year-over-year CRE deal volumes, but this pattern should begin to reverse itself in 2018, Ten-X‘s chief economist Peter Muoio tells GlobeSt.com. According to a recent real estate capital trends research report from the firm—which describes critical shifts across the five CRE asset classes (multifamily, hotel, industrial, office and retail) as it pertains to deal flow, cap rates, pricing trends and more—commercial real estate investment activity increased for the second straight quarter in Q4. However, the report also cautions that a variety of factors, including rising interest rates and the prospect of wholesale policy changes on the federal level, could mean that the growth period is ending.

Other notable findings from the report include:

  • The apartment sector led the way in Q4, accounting for 34.7% of transactions, and apartment pricing has increased by a strong 16.2% over the past year. That said, in several major cities, the threat of oversupply has begun to lift vacancies and cool rents.
  • With rising Treasury yields, cap rates increased in each sector except for apartments, whose cap rates ticked down by 10 basis points. Retail and hotel pricing are lagging, since they deal with lasting shifts in consumer behavior; retail, in particular, saw price declines in three of the past five months.

We spoke with Muoio about the growth period, whether it’s really ending and on what investors and brokers will focus if deal volume continues to slow.

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