April Sales Weakest So Far This Year

Monitoring changes in commercial real estate markets by looking at what happened a month or two ago is driving with eyes glued on the rear-view mirror. There’s an illusion of clarity and control. You can get blindsided, but some information is better than none.

The latest sales report from Colliers using MSCI data covers April, and it was definitely a showers kind of period. “April sales data was the weakest so far in 2024,” wrote Colliers Director of Research, U.S. Capital Markets Aaron Jodka. “The rise in the 10-year Treasury over the month stalled deals and will likely reverberate in May.”

Whether that is the case remains to be seen. The 10-year Treasury yield in May, which helps push up interest rates, was down perhaps 15 basis points from April, so unclear whether that was enough to restart stalled deals.

Multifamily was the “highest trading asset class” in April at $4.5 billion, but that also represented the largest year-over-year volume drop at 49%, with a -7% price change. The volume was the lowest since February 2012. “One of the month’s top deals was AEW’s acquisition of the 370-unit The Ranch at Moorpark in Moorpark, CA, for $133.2 million, translating to $360,000/unit,” he wrote. “Institutional buyers are returning to the market, which should bolster volume going forward.”

Industrial was the next largest volume at $4.0 billion. That was a 15% drop year over year in volume, but a positive 6% increase in price. It’s the lowest for the property type since the pandemic. But cap rates keep moving up, “enticing new buyers to the market.” KKR acquired a four-property mix of flex and warehouse space. The allocated price translates to $215 per square foot.

Office saw $2.9 billion in volume, down 14% year over year, and price down 15%. It was a “return to normalcy.” CBD was more than $1 billion in back-to-back months.

Retail had $2.3 billion in transactions, an 11% drop from the previous year, and a 3% fall in prices. Colliers noted that “a trend toward volume stabilization continues.” The largest deals were for $84.5 million and $90.4 million.

Hospitality, at $1.9 billion volume, was up 98% year over year though prices were down 6%. “Fewer assets were traded, suggesting that while more expensive properties are being sold, overall deal velocity remains muted.” Host Hotels & Resorts acquiring two Nashville properties for $530 million at a 7.4% cap rate.

The most important point that Jodka made was this: “The market is still trying to find equilibrium, so monthly data is expected to remain volatile.” In other words, don’t expect month-to-month movement to reveal trustworthy trends.