Q2 Investment Sales Show Promise of More Growth

Does the volume of commercial real estate transactions have nowhere to go but up? Some signs point in that direction, according to a Colliers’ 2Q 2024 MSCI report.

The analysis cites some positive data. Volume rose 15.8% in the three months through June and was down just 1.2% compared to the prior year, while pricing was little changed in the period.

“These indicators, along with other green shoots, suggest volume has bottomed,” the report said. “Signs of recovery are emerging.”

Though sales were flat compared to the previous year, Colliers predicted they would show a gain when all the data is compiled. “Portfolio and entity trades increased 24% over the past year, indicating that institutional capital is returning to the market,” the report noted. “Competition is beginning to increase.”

In the second quarter of 2024, CRE sales volume for the U.S. totaled $86.4 billion, down 1% from 2Q 2023. A couple of categories showed increased volume. Multifamily brought in $38.8 billion – up 20% from the previous year, but with prices down 8%. Hospitality recorded $6.7 billion in transactions, 4% more than in the previous year, and a 6% price drop.

Office’s $11 billion in sales represented a 20% slump. Industrial brought in $20 billion, 17% less but with an 8% price boost, and retail transactions totaled $9.9 billion, down 10%.

Office prices dipped 12% compared to the prior year. However, “the velocity of transactions is showing signs of rebounding, particularly in CBDs,” Colliers said. It noted that sales volume rose in 13 of the top 25 markets. “They range from growth markets like Atlanta, Phoenix, Charlotte, and Nashville to core markets, including Washington, D.C., Chicago, and Seattle.”

Colliers noted that industrial demonstrated the most robust price increase of all asset classes, rising steadily for four consecutive quarters. Dallas was the only major distribution hub to post a gain, but 10 local and regional markets also saw higher sales volume.

The significant increase in multifamily sales was largely due to a single transaction: Blackstone’s April acquisition of AIR Communities to take it private, which raised the total of CRE sales as a whole by $10 billion. While this level of activity was not likely to be sustainable, the report noted that 19 of the top 25 markets posted gains in the first half – with six more than doubling.

In retail, there are signs that pricing may be stabilizing. Volume in 15 of the top 25 markets rose in the first half, some by 100%-300%.

Volume in hospitality increased on both a quarterly and annual basis. Single-asset sales dominated. Entity and portfolio deals rose. Of the top 25, 10 markets enjoyed annual price increases, many up 100%-450%. First-half records were set in Nashville, New York City boroughs, Ventura County, CA, and Madison, WI.

Time will tell whether these green shoots grow into sturdy plants.