This year, the market may find an equilibrium. The last few years—2014, 2015, 2016 and 2017—have produced record-breaking investment volumes throughout the West Coast, keeping professionals endlessly busy. This year, the first quarter has been slower than usual for investment sales activity, but Scott Peterson, an SVP at CBRE, says that is because we are returning to a normalized market cycle. That means the first quarter should be slow while the fourth quarter is the busiest.
“As a general trend, the last several years have been busy,” Peterson tells GlobeSt.com. “2014, 2015 and 2016 were busy, and it got a little hard to get things done in 2017 because every product type is full. I think we have reverted back to a normalized market. Historically, the first quarter is always slow and the fourth quarter is the busiest. I think we have returned back to that market. I think this year, every quarter is going to be busier than the last, which is a traditional market for us.”
This year, investment sales on the West Coast, where Peterson focuses, have slowed for both office and multifamily coming off a bust 2017. Peterson expects that to change in the second quarter with activity gaining momentum steadily throughout the year. “On the sale side, sales have been slow for office and multifamily. That being said, there has been product hit the market in the last 30 days and that will hit the market in the next 30 days,” he says. “I think overall, you are going to see a slower first quarter but a very busy second quarter.”
While sales have slowed, refinancing activity has kept Peterson's office busy in the first months of 2018. He is seeing more clients choosing to hold onto assets longer than expected and extending their financing. “We see a lot of clients that have executed a business plan, they are refinancing into a cheaper cost of capital. You have seen some investors refinance into a three-to-five year hold,” he explains. “Those clients are looking to hold a little bit longer in the belief that this market is going to stay relatively healthy, and there is nothing that is going to substantially derail business plans for office as well as multifamily. They see a lot of runway left in the cycle.”
As for his out look on investment sales volume through the year: all positive signs ahead. Peterson is expecting sales volumes to be similar to 2017 numbers. “I think that in general, it is going to be similar to last year,” he says. “You might not have the swing between the first half and the second half that you saw last year, but overall, you are going to be on the same level. There is no sign of the available capital that needs to be placed into real estate. This is a good competitive market for good-quality product. That isn't going to change, and because of that, you are going to continue to see people bringing properties to market to sell.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
