CRE Investment Surges In Q3, But Still Way Off From Last Year
Investment sales by dollar volume for U.S. commercial real estate rebounded by 33.9% to $61.3B in the third quarter of 2020 compared with $40.2B in the second quarter, which had experienced the lowest volume since the Great Recession, according to a new report by CBRE.
Even so, the Q3 2020 total is low compared with every quarter since the end of the 2008-09 downturn. Compared with Q3 2019, investment for the third quarter was off 60.4% across all properties including both single-asset and portfolio sales, the report says.
Investment volume in greater New York properties dropped 43.7% since last year, but the area remains the top spot for U.S. CRE investors, according to the CBRE report, with investment volume for the quarter totaling more than $35B. Greater Los Angeles, the San Francisco Bay Area, Dallas/Fort Worth and metro Washington, D.C., were the other top Q3 targets for investors.
Overseas investors also shied away from U.S. commercial properties during the third quarter, with cross-border volume off 70.8% year-over-year, the report found. Compared with the second quarter of 2020, cross-border investment was off by 12.2%.
The U.S. hospitality sector has seen the steepest drop in overall investor interest, with a year-over-year contraction in investment volume of 84.3%, the report notes. The lowest drop was in the multifamily sector, down 50.9% since last year.
Despite logistics as a growth industry during the coronavirus pandemic, investors are still reluctant to buy into the sector, with investment volume for industrial properties down 64.5%, which was more than the decline for either office or retail, which were both off 60.4%, CBRE reports.
Investors may be responding to overall declines in industrial space use as the pandemic takes a bite out of U.S. economic activity. In the Chicago industrial market, for example, tenants aren't renewing or are downsizing their space, according to Colliers International's Q3 report on the market.
During the quarter, net industrial absorption totaled 1.2M SF in metro Chicago, the report found. Though that is a positive number, it is dwarfed by net absorption during the third quarter of 2019, which was more than 9.2M SF. Vacancies in the market also rose in the market year-over-year, from 6.15% in Q3 2019 to 6.72% in Q3 2020.
“User types that have pulled back include apparel companies, some manufacturers, some retailers and users that produce or distribute consumer durables,” Colliers International Executive Managing Director Jeff Devine told Bisnow, though he also said that some space users are growing despite expectations, including automakers.