By Jim Costello 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.
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.