RCA Insights

US CRE Volume Slides Through Q1 But Pricing Holds Steady

By on April 15th, 2016

U.S. commercial property sales fell in the first quarter, with preliminary data showing deal volume came in at $101 billion, down 27% from a year earlier. Despite this fall in volume, pricing is still holding fairly steady.

Preliminary figures show that Q1’16 portfolio and entity-level deals came in at $33.6 billion, down 36% from Q1’15, which was the second strongest Q1 on record. The sale of individual assets also fell, with preliminary volume down 21% at $67.5 billion.

1604-volume-slides-main-01Volume and pricing normally move with one another but there is a disconnect in these two measures for 2016 so far, with Q1’16 cap rates standing largely at the same levels as one year earlier. This break between pricing and volume suggests not a collapse in activity but a market pause, with buyers and sellers moving further apart on pricing expectations.

Next week Real Capital Analytics will publish its US Capital Trends reports which will further detail trends in deal activity and examine the source of weakness in commercial real estate sales.

Additionally, look for our next posts on the key highlights from the Q1’16 editions of Europe Capital Trends and Global Capital Trends.

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.