Real Capital Analytics (RCA) has released May transaction volume figures.
Commercial property deal volume came in at $28.6 billion, marking a 36 percent decline versus the same period in 2015. This decline does seem shocking and has led some to speculate that the market is facing a correction, but it is important to remember what we stated last month: It is virtually never advisable to look at this data on a linked-month basis due to the incongruity in the timing of large deals, which can skew the comparison.
The story of the fall in volume is more about early 2015 when portfolio and entity-level transaction activity surged 58 percent ahead of the pace set in 2014. These large deals were down 56 percent year-over-year on sales of $6.5 billion this past month. Although the market is coming down from those previous highs on deal activity, the pace of single-asset sales set in May is still elevated. Average deal volume in May for 2012, 2013 and 2014 was $20 billion, therefore volume is just adjusting to a more normal pace.
In good news, resilient asset pricing continues with RCA reporting an all-time low in capitalization rates in May. Cap rates measured 6.12 percent across all property types, 23 bps lower than one year prior, driven by lower benchmark interest rates and improving credit dynamics across several lender types.
Looking at volumes from a T-12 perspective, we see that volumes across all property types have started to steadily decline over the past five months. The longest decline since the start of 2008.
Additionally, specific property type analysis included in the table below shows each property type’s decline from their recent peak. Only the office and apartment sectors are currently beating the overall market with hotels and industrial lagging the most.
Sources: HFF Research, Real Capital Analytics