RCA Insights

US Commercial Real Estate Market Takes a Breather in February

By on March 18th, 2016

Preliminary estimates suggest that U.S. commercial real estate volume fell 48% in February from a year earlier, following January’s 3% drop. Combined with the fall in the Moody’s/RCA CPPI in January — the first monthly decline in six years — there may be concerns that the market is on the verge of broader downturn. Another view is that the market is taking a breather from megadeals.

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Portfolio and entity-level deals are down 70% from a year earlier on sales of $6.7 billion, preliminary data shows. The market for CMBS debt, an important driver of megadeals, is facing twin challenges. Turmoil in the corporate bond market spilled over to the CMBS market in the second half of 2015, raising the price of debt, and ongoing concerns about risk retention are also limiting the supply of debt.

Next week, Real Capital Analytics will publish its US Capital Trends reports which will further detail the trends in February deal activity. The reports will also profile the sources of lending that have dominated each property sector in 2015, as well as indicating which types of lenders are poised to gain or lose market share in 2016.

Jim Costello

Jim Costello

Senior Vice President
jcostello@rcanalytics.com

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.