CRE Transaction Numbers May Be Seeing Some Recovery
But to get to pre-pandemic normalcy, interest rates would have to come down.
There’s a bit of a turnaround in CRE sales transactions, according to a Moody’s CRE report. But the current results and trends vary by property type and a return to pre-pandemic normalcy will need the help of the Federal Reserve’s reduction of interest rates.
“CRE transactions have started to show some signs of recovery with the year-over-year transaction decline now only at -8.0% in the first quarter of 2024 (up from -18.4% in Q4 2023 and the all-time low of -55.1% in Q2 2023),” the report read. “There was a decline in office transaction in Q1 2024 but that was mainly due to several large transaction in Q4 2024, namely $2 billion transaction for 250 Vesey St. and a $1.5 billion transaction for Two Manhattan West, both of which are in NYC.”
The changes in transaction levels have been in gross dollars and not in units, which makes a fully equivalent comparison difficult to see.
“When looking at year-over-year sales growth by count, transactions in the $50-$100 million [range] still lead the way, while the [over] $100 Mill transactions have really been buoyed by a few large deals,” Moody’s Associate Economist Chris Rosin tells GlobeSt.com.
“Kering, the parent company of Gucci, recently bought a $963 million retail property on Fifth Avenue in NYC earlier this year,” the report said. “After their initial plan to turn Westside Pavilion shopping mall into an office complex exclusively for Google fell through, Hudson Pacific was able to sell the property to UCLA for $700 million, which will be turning the shopping mall into a sprawling research facility.”
“Unit activity for smaller transaction, while showing slight recover still lags behind,” Rosin adds
While getting closer to pre-pandemic growth levels, a recovery to a 2019 and earlier norm is yet to happen. “Returning to pre-pandemic normalcy will be difficult, especially for sectors like office,” Rosin says. “The office sector is still seeking a new equilibrium in an environment dominated by the hybrid work model. Ultimately however, before we reach this new post-pandemic normalcy, interest rates need to come down.”
“Growth for smaller transactions especially those less than $50 million will most likely need to see some recovery before we reach any state of normalcy,” he added. “When it comes to property types, office continues to struggle in finding a new equilibrium. Meanwhile, multifamily is struggling to deal with supply issues brought on ongoing construction and supply chain problems.”