RCA Insights

Who Is Making the Market?

By on October 14th, 2016

Transaction activity throughout 2016 has been falling relative to 2015 and preliminary figures suggest lower activity in Q3’16 as well. However pricing has held up, and pushed higher in many cases, as there are still active buyers in the market.

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Consistently since 2014 cross-border investors have been net buyers. These investors were more active in 2015, but they are still the leading net buyer of assets and thus can be seen as making the market.

Cross-border investors have had more market competition in 2016 with both institutional and private investors becoming net buyers. These groups of investors have a common need driving their investment activity. The global capital markets are starved for yield with some fixed income vehicles in the bond markets now delivering negative yields. With limited yield options elsewhere in the market, these investors are still active in commercial real estate despite cyclically high prices.

REITs have posted the most significant move from net buyers to net sellers over the last three years. REIT share prices began to slide in early 2015 and into 2016 REITs have sold $29 billion more than they have acquired.

Next week Real Capital Analytics will publish the Q3’16 edition of US Capital Trends. In this edition we look at the composition of buyers across the property sectors and provide a full analysis of volume and pricing for the quarter.

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.