First-quarter investment activity across the five commercial real estate sectors was up 6.7 percent in 2018, compared to Q1 2017, though total deal volume was lower than both the third and fourth quarters of last year, according to a new report from Tex-X Commercial.
Ten-X’s latest Commercial Real Estate Volume & Pricing Trends report found the biggest quarterly declines in transaction volume in the apartment and office sectors. The hotel and industrial sectors recorded modest gains, while retail also fell.
Buyers and sellers continue to struggle with a gap in pricing expectations, Ten-X says, noting that heavy supply is looming in the apartment, hotel and industrial sectors, while technological innovation is crimping demand for both office and retail space.
“While some have anticipated the bottom falling out of the market for more than a year, Q1’s year-over-year uptick in deal volume suggests resilience in the commercial real estate sector,” Ten-X Chief Economist Peter Muoio was quoted in a Ten-X news release. “Even as some owners continue to demand the high valuations of yesteryear, a fair amount of market participants have recognized the new realities and found enough common ground to get deals done.”
Transaction Volume in Q1 2018
Office – down $9.5 billion
Industrial – up $2.2 billion
Apartment – down $12 billion
Hotel – up $4.5 billion
Retail – down $2.4 billion
Ten-X’s All Property Nowcast, which gauges national pricing through a combination of proprietary and third-party data, calculated that property valuations fell 1.4 percent year-over-year in April, and is now below its year-ago level for the first time in the history of the index. Month-over-month, it “eked out a 0.1 percent gain.”
Within sectors of the industry, Ten-X reported mixed results in April.
Office – The Ten-X Office Nowcast increased by 0.6 percent in April — the biggest monthly gain of any property sector. With the Office Nowcast now having climbed in three of the past four months, it is up 1 percent on the year, but this overall increase masks bifurcations in regional pricing.
Industrial – Industrial pricing weakened on a monthly basis for the fifth time in six months in April, this time by 0.7 percent. This loss generated a contraction of 5.1 percent year-over-year, the worst annual performance among the covered segments.
Apartment – The Apartment Nowcast saw little change, declining 2.3 percent on the year. Weakening in the Ten-X Apartment Nowcast may reflect investor unease about fundamentals as new supply has increased.
Hotel – There was also little change here, with the Hotel Nowcast falling 3.9 percent on the year. The 0.1 percent monthly decline in hotel pricing was the sector’s third monthly decline in the last four months, as hotel pricing fell fairly evenly across most regions of the US.
Retail – Despite persistently poor fundamentals and record-level retailer bankruptcies due to increases in e-commerce, the Ten-X Retail Nowcast remained solid. The Retail Nowcast rose 0.5 percent in April, resulting in a 3.4 percent year-over-year gain, though this marks its slowest pace in over three years.
You can read the full media release regarding the report by clicking here.