If the third and fourth quarters of last year are any indication, then deal volume is returning to the
commercial real estate markets. According to CoStar COMPs, sales volume for commercial properties
nearly doubled from about $22 billion of deals in the first quarter of 2010 to almost $36 billion in the fourth
quarter - a number that will likely increase as CoStar finalizes its quarterly tally and confirms the flurry of
deals signed at year-end and those that surface in public records.
Several industry outlooks released in the last few weeks expect that a heightened level of deal
volume is primed to continue.
"After rising by an estimate 60% in 2010, commercial property sales volume is expected to increase by
another 25% to 20% in 2011," predicted William E. Hughes, senior vice president and managing director
of Marcus & Millichap Capital Corp. "The expected improvement [in 2011] will move the investment
market closer to a more ‘normalized' level." The current transaction pace is very similar to that of the
second half of 2002, with nearly identical third quarter volumes and likely comparable fourth quarter
trading levels as well, according to Jones Lang LaSalle. The activity in both time frames is representative
of more normalized, sustainable levels - much lower than the unprecedented lofty levels of the 2005 to
2007 boom, and much greater than the sales drought in 2009.
The level of liquidity in the U.S. capital markets has improved dramatically over the course of 2010,
as investors have regained confidence, particularly in stable, well-leased and located properties in
the traditionally best-performing markets, Jones Lang LaSalle noted. Activity will continue to trend
upward throughout 2011 as investor interest grows amid a very favorable monetary environment and an
improving macroeconomic picture.
The deals in 2011 are likely to look different than the deals in 2010, too. There is an increased willingness
to look for buying opportunities beyond either super core markets and trophy assets or vastly distressed
properties, according to the fourth quarter 2010 findings of the PwC Real Estate Investor Survey. The
report notes that interest in secondary locations, Class-B properties, and value-added Class-A plays is
heating up and that buyers are becoming more comfortable with taking on slightly more risk, suggesting
that both investors and lenders are gaining more confidence in the overall performance of both the
economy and the real estate industry.
And at the outset of 2011, CoStar COMPS shows that more than 6,700 property sales are pending with a
combined asking price of more than $9.5 billion. Of that dollar volume, about $1.49 billion is reportedly in
escrow; another $6.41 billion under contract and $1.59 billion listed as pending.
Where office properties have dominated the 2010 sales landscape, retail, multifamily and industrial
properties are the three leading property types in pending deals with asking price volumes of $2.49 billion,
$2.08 billion and $1.94 billion respectively. Office properties make up just about $1.91 billion of pending
deals. Mixed-use properties come in at about $535 million; flex properties at $268 million, hospitality at
$165 million.
Comments(1)