By Bob White on February 19th, 2016
In spite of volatility in the broader financial market, preliminary sales figures suggest that deal volume remained elevated at $44.5 billion in January. While this figure is down 7% from a year earlier, it is still the second most active January on record. Combined with record volume of $72.7b in December 2015, the market has posted the highest deal volume ever in any 60-day period.
Despite the record volume, pricing ceased its three-year acceleration in growth with the Moody’s/RCA CPPI national aggregate unchanged in December. Cap rates have also flattened out over recent months, with preliminary data for January and deals currently pending suggesting no real movement at this early stage of 2016. Deal volume and pricing often move together and it would not be surprising to see both price appreciation and deal volume slow to a single-digit pace of growth in 2016, rather than the double-digit gains experienced in recent years.
Global concerns have resulted in the worst start of any year in the broader financial market. Still, while slowing, commercial real estate trends appear resilient. Those equity market fears may provide lift for the most core commercial real estate as investors pile into low risk assets during volatile periods. Interest rates have unexpectedly fallen and the outlook for further movements by the Federal Reserve is limited.
Underlying the CRE investment trends is a considerable amount of capital including a substantial increase in flows from abroad.
On February 24, Real Capital Analytics will be publishing its US Capital Trends reports which will further detail this capital, summarize the composition of buyers in the market, and provide more detailed analysis into recent volume and pricing trends.