RCA Insights

Summer Months May Presage US Activity Patterns

By on August 15th, 2018

Nobody wants to work in July or August, but it seems that not all investors have been off at the beach. Preliminary figures through July suggest that for the year to date, U.S. deal volume is unchanged for single asset sales compared with a year prior, but up at a double-digit pace for portfolio and entity-level transactions.

Deal activity is typically slow in July and August, and little wonder. Sitting here in New York, when the subway gets hotter than Death Valley and smells like garbage to boot, it is time to take a vacation and get out of town. The patterns for these typically slow months may, however, presage what we can expect when activity picks up again in September when everybody is back at work.

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Investors are still skittish on the office and retail sectors. These are the only two sectors where preliminary figures through July suggest that volume is down for the year to date. All other property sectors have deal activity up for the year through July.

Megadeal activity continues to boost volume overall, but there are divisions by property sector. Portfolio and entity-level deals are not a significant feature of the investment volume for the office and apartment markets. For industrial, hotel and especially retail, deal activity is dominated by double-digit growth in megadeal volume.

This pattern should hold late into the third and fourth quarters of 2018 as we are tracking nine separate megadeals in contract. September and December, especially, tend to be some of the strongest months for deal volume in the calendar and some of these megadeals may close in those busy months. If they do close in those months – unless there is also a drastic pickup in single asset sales late in the game –  2018 volume will increasingly be dependent on these portfolio and entity-level deals.

On August 22 Real Capital Analytics will publish the new issue of US Capital Trends. This edition reports on July volume and pricing trends, including a first look at the latest RCA CPPI results.

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.