CRE has biggest-ever sales quarter
More than $193B in commercial real estate traded hands in Q3
Investors purchased $193 billion in commercial real estate during the third quarter, marking a reported record that surpassed pre-pandemic spending by 19%.
Apartment buildings, life-science labs, and industrial spaces to support the e-commerce boom drove the record period, according to data from Real Capital Analytics reported by the Wall Street Journal. The report notes sales of the properties surged so much, they canceled out shrinking office and retail markets and defied dire predictions of the sector’s crash.
The record period is part of a record year for the sector. The Journal reports sales in the first nine months of the year hit $462 billion, 10 percent more than the same time in 2019 and the highest of the same period from any other year.
Investors in commercial real estate previously outpaced pre-pandemic figures in the second quarter, spending $144.7 billion. This marks almost triple the purchases in 2020, but $50 billion less than the most recent purchases.
Data and analytics firm Green Street’s index for tracking property owned by REITs also showed a surge in activity. According to the Journal, the index is up almost 22 percent from its pandemic nadir and 8 percent from pre-pandemic times.
The boom is largely fueled by investors snagging a large number of single properties in a multitude of deals, rather than previous booms featuring plentiful portfolio sales, or sales of entire companies.
Green Street data show the hot commercial real estate market is being paced by industrial real estate and the multifamily market. The Journal reports that the industrial market has soared 41 percent in value since before the pandemic, while the multifamily market has seen a 19 percent increase in value.
The industrial market hit several records in the last quarter, including an all-time low in vacancy and record highs in net absorption and average asking rents.
In addition to new deals, developers in the space are setting records this year. A record 521.4 million square feet of space was under construction in the third quarter and approximately 340 million square feet is slated for delivery this year.
However, the surges in activity aren’t being felt universally across all parts of the industry. According to Green Street data, the value of shopping malls are down 13 percent during the pandemic, while the values of hotels have dropped 4.2 percent and office buildings have dropped 5.6 percent.
[WSJ] — Holden Walter-Warner