The roller coaster of the current real estate cycle might be topping off, even if we’re not headed for a plunge anytime soon. Commercial real estate sales tanked in February with $25B in sales, compared to $47.3B in the same month last year.
“Clearly there has been a plateauing,” Jonathan Gray, Blackstone’s global head of real estate, tells the Wall Street Journal. In January sales were $46.2B. Prices and commercial property values are also beginning to level off.
An index of hotels tracked by Green Street Advisors was off 10% last month year-over-year, and Green Street’s broad valuation index in February rose 8.7%, a drop from March '15's 11% surge.
It’s not clear yet whether February is an anomaly or a sign of the new normal, although other developments seem to favor the latter. Brandywine Realty Trust sold off $765M of property this year, for example.
Concerns over interest rates and global volatility, as well as new regulations on major lenders, have also made debt financing harder to come by, a headwind for commercial real estate as a whole.
“Buyers have been hearing ‘no’ from lenders for the first time in awhile,” Jim Costello, an SVP at Real Capital Analytics, tells the WSJ.
In 2015 roughly $100B of CMBS were issued, while this year its projected volume will fall to between $60B and $75B. While worrying, the signs thus far are by no means definitive.
“It’s too early to call the end of the cycle,” Blackstone’s Gray tells the Journal. [WSJ]
