CRE Sale Closings in U.S. Dropped Sharply in January

According to Real Capital Analytics’ latest monthly report on the U.S. office, industrial, retail and apartment markets, sales transactions are drastically down year-over-year, while offerings for sale continue to be strong in most sectors. Cap rates, no surprise, are up almost across the board. In each sector, the report notes, some buyers are still active and still willing to aggressively pursue the right assets. “While equity capital for property in the U.S. remains plentiful,” the report states, “the buying hiatus is likely to continue…. uncertainty over economic growth has replaced the credit crunch as the major driver of the continuing slowdown in property sales.” January sales volume in the office market, according to RCA’s February Capital Trends Monthly report, was down a dramatic 80 percent, from $20.1 billion in January 2007 to just $4.3 billion last month. That amount was the lowest such figure since January 2004, according to the report. (These figures count only “significant properties,” those valued at more than $5 million.) Manhattan has been especially hard hit, with YoY office sales plummetting 90 percent, from $6.14 billion in closings in January 2007 to only $613 million last month. New office building offerings, meanwhile, though down 20 percent YoY, nonetheless significantly outpaced sales, with a total of $10.1 billion being put on the market. The report attributes all this to the credit crunch and general economic uncertainty, and states that “it appears activity will drop even further in February.” Although office sales have declined across the board, the report notes that the most severe fall has been for portfolio transactions and other large sales. Monthly sales of significant industrial properties fell short of the $2 billion mark in January for the first time in three years. On a YoY basis, such sales fell 65 percent, to $1.7 billion. In the apartment sector, the sales volume of $3.5 billion, down 47 percent YoY, was overshadowed by the $7.6 billion worth of new property offerings. This sector was the exception to rising cap rates: The average cap rate had fallen 5 basis points in the previous 30 days, to 6.11 percent. And in retail, sales volume hit its lowest level in four years, at $2.2 billion, down 57 percnt YoY. New offerings totaled almost twice the amount sold.