December Investment Volume Could Be Tame–Or Not

With Black Friday still visible in the rearview mirror and Cyber Monday upon us, the holiday shopping season is officially underway, but it remains to be seen if the buying frenzy will extend to the commercial real estate market.

With Black Friday still visible in the rearview mirror and Cyber Monday upon us, the holiday shopping season is officially underway, but it remains to be seen if the buying frenzy will extend to the commercial real estate market. A case of business as usual would mean a notable uptick in activity during the last month of the year.

Historically, December has been the biggest month of the year for sales transactions, and there’s method to the madness. “Investors like to close deals by year-end and it kind of completes the traditional marketing process which usually starts after Labor Day for major institutional offerings,” Dan Fasulo, managing director with global commercial real estate research and consulting firm Real Capital Analytics, told Commercial Property Executive.

This year, certain exceptional dynamics may alter the traditional December investment pattern; although, it’s still too early for firm predictions.

“I’m less bullish about a flurry of activity in December than I was a few weeks ago,” Fasulo said. “As much as I would have hoped that uncertainty would have gone away with the presidential election being over, I don’t think it has gone away, which is a shame. We know who the president is going to be but it doesn’t seem to have translated into investment.”

Additionally, it remains to be seen how fiscal cliff fears will impact real estate investment activity.

Whatever the issue, a toll on sales volume is already visible. As concluded in a report by commercial real estate services firm Jones Lang LaSalle, with the lack of seller motivation and buyer confidence, transaction completions have become more protracted.

Fasulo said that, “For a number of major trophy assets that came to the market and are forecasted to close by the end of the year–billion-dollar deals–it looks like bids are coming in a little low, and existing owners might wind up recapitalizing or  refinancing, versus selling outright.”

How December’s investment volume will be impacted is anyone’s guess, but we’ll know for sure in about 30 days.