Colliers: CRE Transactions May Be Beginning to Thaw
The market may be approaching its low point, though sales data lags.
Colliers reported a significant drop-off in commercial real estate sales for May, coming in at $19.8 billion, which was 71% lower than last year’s volume, led by multifamily and industrial.
Given that volume peaked on a four-quarter rolling basis in Q2 2022, the firm said it was not surprised, wrote analyst Aaron Jodka.
“Values continue to adjust, but market participants are happy about the Fed’s recent interest rate pause,” according to the report.
Perhaps more significantly, Jodka continued, “The market may be approaching its low point, though sales data lags. Both offerings and portfolio activity are picking up, signifying a thawing market.”
Multifamily remains the most liquid asset class, but it also had the sharpest drop-off over the past year, largely due to rising insurance costs, Colliers said.
The top deals of the month were outside of Florida and Texas with the top sale being the 1,869-unit Lake Meadows in Chicago for $161 million, or $86,100 per unit. Other large deals took place in California, Arizona, and New York.
“Sales volume should rise in the months ahead,” according to the report.
After a lull, multiple $1 billion-plus industrial portfolios were on the market recently, indicating that there are buyers for such deals again.
The Inland Empire market continues to show strength with the largest industrial trade of the month being the multiple-property Corona Lakeside Logistics Center in Corona, CA. The 730,000-square-foot properties traded for $325 million, or $445 per square foot.
Stunted volume is expected to continue in office, Colliers said. Suburban volume is stronger overall and trades are generally still small. Conversion plays are picking up.
The largest deal of the month was the Flatiron Building in Manhattan, for $161 million, or $894 per square foot, when GFP Real Estate bought out its partners.
The Torrey Pines Research Center, a life sciences asset in San Diego, traded for $86 million, or $1,049 per square foot, to DivcoWest, at a sub-5% cap rate.
In a residential conversion deal, 2100 M Street NW, in Washington, DC, a 291,000-square-foot asset, sold to Post Brothers for $66.8 million, or $230 per square foot.
Retail volume was down 62%, with one of the few malls to trade in recent memory, the 1.1-million-square-foot Westfield Brandon, in Brandon, FL, going in May to North American Development Group for $220 million, or $192 per square foot. The reported cap rate was 10%.
In hospitality, private buyers looking at SBA loans are finding success and a source of capital, helping to keep that segment of the market active.
The largest deal of the month was the 279-room Claremont Resort & Spa in Oakland, CA, sold to Ohana Real Estate Investors for $163.3 million, or $585,300 per room.