Volume and Pricing May Have Hit Bottom in Q2

‘Light at the end of the tunnel’ says MSCI, although volume may slide back to declines next quarter.

Since the beginning of the year, various players in CRE have been predicting the approach of a market bottom to the fall that began in 2022. MSCI’s Capital Trends report for the second quarter of 2024 adds another voice with a more definitive tone.

The firm said that the slide in deal volume and pricing “came to an end in the second quarter.” Using data from the RCA CPPI National All-Property Index, they showed that year-over-year changes in dollar volume and pricing seem to have turned a corner, or, more specifically, two graphs.

Each showed a rapid ascension from the pandemic’s beginning into and through 2021. Between the last quarter of 2021 and the first of 2022, a similar downward plunge started, with volume falling to 50% drops and pricing to -10% price growth.

Both the graphs, though, show a turn upward again in the first or second quarter of 2023. Both volume and price were still negative year-over-year in the first quarter of 2024 but were zero by Q2. That was an end to six continuous quarters of commercial property prices. If the trend line continues, Q3 should see both volume and pricing move back into positive year-over-year growth.

However, there were complications because data is rarely tidy. Total transaction volume was boosted in Q2 by Blackstone taking AIR Communities private. Without that, the volume would have been down by 13% year over year.

Similarly, individual asset sales were down 9% year over year in Q2, with the total having been boosted by that Blackstone transaction. “This pace is much improved from the 57% YOY pace of decline set in the second quarter of 2023, but it is still a decline,” they wrote. Keeping an upward trajectory will be difficult, easily sleeping into the negative again if there isn’t either broader growth or additional support from megadeals.

Here are some of the results relating to deal volume for Q2 and the first half of the year, for different property types:

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