RCA Insights

Financing Availability Provides a Floor for US Prices

By on March 31st, 2021

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Deal volume contracted in 2020 due to economic uncertainty but did not result in a price collapse like that seen during the Global Financial Crisis (GFC). Capital flowing into other structures helped support pricing during this downturn.

Into the second quarter as new acquisitions fell, financing activity picked up some of the slack in the capital stack. The value of properties refinanced represented 61% of all capital flows to commercial real estate in the quarter. This figure was well above the 19% share represented by new acquisitions.

composition of US capital flows by construction, refinancing and acquisitions

The inability to refinance cash-flowing properties was a problem during the GFC. In this Covid-19 recession, however, the ability to refinance and not sell has led to sticky prices. Owners facing challenges are not forced to sell and have largely been able to refinance.

Into the second half of 2020, financing availability put a floor under the worst possible price declines and the share of capital flows from new acquisitions grew from a 28% share of the market in the third quarter up to a 41% portion in the fourth quarter.

Since 2016, construction activity has averaged 20% of all capital flows. Into the final quarter of 2020, however, the share retreated to only 16% as construction starts pulled back for the property sectors most impacted by the pandemic.


A version of this article first appeared in US Capital Trends, published March 24. To learn more about RCA’s reports, data and tools, contact usRCA clients <<click here>> to access the current edition of US Capital Trends.

More by Jim Costello on RCA Insights:

US Debt Liquidity to the Rescue: RCA Report Preview

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Apartment Developers Not Buying Dirt Like Before

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Jim Costello

Jim Costello

Senior Vice President

Jim Costello has worked in the CRE space on issues of urban economics since 1990, including a 20-year stint at Torto Wheaton Research. Jim expanded the reach of the Torto Wheaton Research team developing forecasts of global market fundamentals. He also developed approaches to pair the forecast results with frameworks to answer investor questions on asset values and relative investment opportunities.

In the aftermath of the Global Financial Crisis, Jim provided advice to the Treasury Department and helped educate these professionals on commercial real estate performance. Jim is a member of the Commercial Board of Governors of the Mortgage Bankers Administration, where he helps policy makers understand the commercial real estate industry.

Jim is expanding the capabilities of the Real Capital Analytics team on issues of real estate market dynamics. Jim has a master’s degree in economics and is a member of the Counselors of Real Estate.