RCA Insights

US Second Quarter Activity Buckles, Distress Mounts

By on July 16th, 2020

U.S. commercial real estate transaction activity during the coronavirus-blighted second quarter was far from the worst on record. However, the magnitude of the drop from the first quarter was unprecedented.

Evidence of distress is also mounting, according to Real Capital Analytics data, though it’s clear that the pain from the Covid-19 crisis has not been experienced equally across all the property types.

At more than $30 billion, the quarter’s inflow of distress rivals that of the average quarter in 2009. The vast majority of the distress that appeared was related to retail and hotel properties. Together, retail and hotel assets accounted for over 90% of all distress during the second quarter. Industrial has been relatively unscathed, representing less than 1% of all new distress.

The level of potentially distressed assets stands at over three times that of outright distress, having leapt since March. Potential distress is more evenly distributed across the property types. Apartment assets accounted for more than 20% of potential distress in the quarter, while offices represented about 15%.

Despite the availability of dry powder, investors stuck to the sidelines in the second quarter, with deal volume totaling about one third of the level seen in the same quarter a year ago, preliminary RCA data shows.

The pause in transaction activity is in part due to potential buyers’ unwillingness to overpay. We are still in what we term the “shock & triage” phase of the cycle and likely will be for some time. It will not be until we start seeing forced sales and transaction volumes start to pick up that we will enter the “price discovery” phase. Until price discovery happens, investors will be wary.

In the new edition of US Capital Trends to be released next week, we will quantify the pain points in the current environment and look across the market for pockets of resilience.


US Capital Trends will be released July 22. This edition details deal activity and pricing across the property types in the second quarter and summarizes RCA’s gauges of distress. We rank U.S. markets for the first half of the year and list the biggest transactions and most active players. 

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Also on RCA Insights:

Loss Aversion and Consequences for Liquidity

Chart: Trends in Commercial Property Deal Flow Since GFC

Global Hotel Sales Slump, Uncertainty Clouds Outlook

Alexis Maltin

Alexis Maltin is Director of the Analytics team, based in New York. Her expertise covers all aspects of commercial real estate transactions, financing and capital flows and she is a leader on the publication of RCA’s US Capital Trends.