The latest twist in the story of commercial real estate during the COVID-19 era came via Real Capital Analytics’ (RCA) U.S. Big Picture Capital Trends report, which revealed that investment volume backtracked in January after a big step forward the prior month.
December saw an 8% bounce in year-over-year volume, a stunning turnaround to cap a tumultuous 2020. In January, however, that growth reverted to a sharp 58% annual decrease in volume, on par with several other months during the COVID crisis.
According to RCA, however, the headline figures don’t tell the whole story. The jump in activity followed by the stark decline doesn’t portend a sudden setback in a rapid recovery, but rather sheds light on a very atypical December.
The big December volume spike in and of itself isn’t necessarily shocking; there’s usually a rush to close deals before the year ends. But per RCA, while that last-minute sprint usually lifts deal volume near the strongest of the year, 2020’s unusual conditions made last December’s rush the largest in history.
Many deals that closed in December last year were already under way earlier in 2020, but tabled due to the pandemic. December’s record movement was, in a way, an artificial high, comprised of many transactions that otherwise would have been spaced out more organically throughout the year. January’s return to pandemic-era norms represents a regression to the current status quo rather than a steep collapse in investor interest.
The multifamily sector remained the leader in transaction volume among commercial sectors, as it has throughout much of the pandemic. Apartment deal volume totaled $7.5 billion in January, down 53% year over year. Industrial deals made up the second largest slice of the commercial pie at $5.2 billion, down 57% from January 2020.
The office sector is still trudging along, down 69% annually in January at $3.5 billion in deal volume. Retail and hotels continue to struggle, both down 73% year over year at $1.4 billion and $600 million, respectively.