If anyone wondered if and when the run on commercial real estate sales would top off, the answers are “yes” and “August.”
Colliers, working with that month’s data from Real Capital Analytics, said, “Meaningful declines in sales volume are now apparent in reported transaction data.” Overall, deal volumes are down year-over-year by 41%.
Starting with office, “At $5.3 billion, August’s monthly activity is the lowest since September 2020,” the firm said. Volume for that category is down 56%. Cap rates have so far held on according to reports.
For Industrial, sales volumes had the biggest drop at 63%. “Buyers are finding accretive financing difficult, as borrowing costs are above cap rates for many deals,” Colliers wrote. “A lack of portfolio sales also held back the industrial market.” Industrial was one of the market darlings during the pandemic and right after, largely because of all the push on e-commerce and product distribution. But a number of people in CRE have been telling GlobeSt.com that they’ve questioned how long industrial can keep going because eventually a time comes when there’s enough supply for the demand, pushing prices down.
In multifamily, “At $23 billion, volume is down 26% year-over-year but rose month-over-month by 14% due to the privatization of American Campus Communities.” Volume did rise month over month, but that owed to the privatization of a large portfolio.
In retail, sales are down. Volume was off 43% year over year and 25% month over month. “To be fair, last August included the Kimco/Weingarten merger, so a volume drop was not unexpected, market conditions aside,” Colliers wrote. “Cap rates are higher in this asset class, but as pressure mounts on other property sectors, adjustments are expected here as well.”
And then there are hotels, the only type of property that saw annual sales volume gains of 6% year over year in August and 20 % month over month.
Something to remember is that this was only one month, and that transactional data is typically a trailing indicator. “Prices are falling as non-cash buyers cannot pay 2021 prices with 2022’s borrowing costs.”
Colliers also noted that if you have a longer view of the business, there’s less competition in acquiring property than seen in years. GlobeSt.com would add that eventually less demand turns into lower prices.