There is a lot to celebrate this year. After a stagnant 2020, investor activity has rapidly rebounded this year to record-breaking levels. In the third quarter, transaction volume hit a new record of $205 billion, but it wasn't a fluke. Tallying up the first three quarter of the year, transaction volume has exceeded the previous high by a fair margin, Doug Prickett, senior managing director of research and investment analytics at Transwestern, shared during a virtual Talk on Economic Indicators and the Impact on CRE earlier this month.

Transaction volumes were last this high the first three months of the year in 2007, illustrating the recovery. While investors are back in the market, there has been a notable shift in asset preference. Multifamily and industrial are the favored asset classes, pushing out office, the historical favorite. "Historically, office has been the favorite asset class, looking back to 2001-2005. Now it is clearly apartments followed by industrial," says Prickett. Apartment transaction volumes have increased 43% over the last two years, while industrial is up 15% from 2019 volumes. Office and retail are both in the red compared to 2019, down 14% and 1% respectively. This isn't necessarily pandemic related, Office and retail have been trading in the same band since 2015.

Unsurprisingly, the fervency for industrial and multifamily have impact pricing, pushing cap rates to historic lows. "Cap rates have dropped to historic lows for apartments and industrial. These really frothy market conditions have led to high pricing for these product types well above replacement costs," says Prickett.