Commercial real estate sales are showing signs of a rebound, with second-quarter U.S. deal volume climbing nearly 18% year-over-year — a sharper pickup than JPMorgan analysts had projected.

U.S. CRE sales totaled $38B in June, down 15.7% year-over-year, according to JPMorgan, citing MSCI Real Assets data. But excluding $887M in entity-level deals — such as REIT and private company acquisitions — property transactions actually rose 6% from a year earlier, the report said.

JPMorgan tracked $10B in entity sales in June 2024.

“2Q activity is tracking well above our assumptions,” JPMorgan says in a report released this week.

Beyond transaction volumes, the report points to broader indicators signaling a stronger-than-expected earnings season. Boosted by favorable foreign exchange trends, JPMorgan expects brokerage firms to post solid second-quarter results.

Second-quarter CRE sales totaled nearly $110B, up almost 18% year-over-year, fueled by a 37.4% surge in retail, a 15% gain in industrial and an 11.5% rise in office transactions, the report says. With April and May figures already revised upward, JPMorgan expects June’s final tally could climb another 30%.

JPMorgan didn’t cite specific drivers behind the surge in CRE activity, but other analysts are pointing to stabilizing valuations and improving fundamentals.

Real estate is emerging as “one of the few places where long-term capital could find income, resilience and strong relative value," Hines Global CIO David Steinbach wrote in the firm’s midyear outlook.

Steinbach added that the sharp decline in new CRE construction is likely to fuel even more sales activity heading into 2025.

“That supply/demand mismatch is not hypothetical — it’s currently being baked into the back half of this decade,” he said. “In the immediate moment, these forces potentially represent an uncommon buying opportunity.”

Apartment and hotel transactions each fell more than 45% year-over-year in June, according to JPMorgan. Yet cap rates declined overall, dropping an average of 25 basis points to 6.5%. Office cap rates fell 32 basis points to 7.3%, while apartment cap rates declined 18 basis points to 5.4%. In contrast, industrial and retail cap rates edged up 9 basis points to 6.7% and 7.1%, respectively.

Cushman & Wakefield Chief Economist Kevin Thorpe told GlobeSt. that central business district offices — whose values have been cut in half amid hybrid work pressures — are now drawing the most investor interest, with CBD office sales jumping 28% year-over-year in Q1.

“The rest of the office sector, outside of the high-quality echelon, remains challenged,” Thorpe said in his 2025 outlook.

"But with new supply constrained and return-to-office gradually trending higher, demand is beginning to trickle down to the next best thing. On a risk-adjusted basis, well-located Class A office will emerge as one of the stronger opportunities in CRE over the next few years.”