RCA Insights

On the Lookout for Buyers: US Capital Trends Preview

By on February 21st, 2019

Like some of us on the morning of January 1, the commercial property market got off to a shaky start in 2019. Preliminary figures show that deal activity in January fell sharply from a year earlier. The sources of the decline were a continuation of concerns the market faced in the fourth quarter of 2018 and the disappearance of one feature that had supported the market last year.

Uncertainty around interest rate trends introduced a sense of caution on the part of buyers into the final quarter of last year. Perhaps the sense of fear will fade later into the first quarter of 2019 with the announcement this week that the Federal Reserve will for now ease off on future increases in the fed funds rate. Either way, preliminary figures show that single asset sales fell sharply in January.

The key feature which bolstered the market last year was cross-border deal activity. As noted in our US Cross-Border Investment Compendium report released yesterday, these investors were behind 17% of all deal activity in 2018, just shy of the 18% record-high level set in 2015. Large global fund managers were particularly focused on entity-level transactions in 2018.

1902 USCT preview cross-border MAIN_v2-01

Into January 2019, however, no significant entity-level transactions were recorded. Given that there were nearly $4 billion of such deals in January 2018, the disappearance of this activity is going to hurt trends for the month.

Next week we release final figures for January in our US Capital Trends report. In this report we will not only highlight  the deal volume for the month but will also analyze the composition of buyers active in the market in 2018. As one might expect, cross-border buyers gained the most market share for the year overall, but the story varies by property sector.

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.