Commercial deal volume ends 2020 down 32% annually

Rough year, but 'worst fears' unrealized, according to RCA

December numbers from Real Capital Analytics (RCA) confirmed what the real estate research firm all but guaranteed the prior month: commercial investment activity in 2020 was way down from the prior year.

RCA reported a total of $405.4 billion in commercial transaction volume for the full year 2020. Transaction volume ended 2020 down 32% annually, ending the year somewhat strongly by moving the needle up from the 40% yearly decline through November.

Encouragingly, deal volume in December slipped just 7% from the same month one year prior, with industrial and multifamily recording actual growth in transaction dollars. The industrial sector, in fact, saw a record high level of volume for a December.

The two segments have so far proven most resilient during the COVID-10 crisis, with investors gaining an understanding of how to overcome deal obstacles and identify new opportunities as the pandemic wore on. Both were essentially flat year to year in terms of deal volume during the fourth quarter, with apartment activity unchanged and industrial down just 2% from the same period in 2019.

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For the full year, the industrial sector logged $98.8 billion in total transaction volume, a year-over-year decline of just 16%. Apartments saw $138.7 billion in deals, most among commercial segments, to finish down 28% from the preceding 12 months.

Hotels, predictably, closed 2020 farthest below 2019 levels, down 68% for the year with a paltry $12.2 billion in deals. Office and retail, likewise hard hit by the risks of COVID transmission in enclosed spaces, ended the year down 40% and 43% in deal volume, respectively. The office sector, which would have topped sectors in deal activity in the not-so-distant past, finished 2020 with $86.1 billion in movement, while retail, which had been sluggish of late even before the pandemic, had $37.7 billion in deal volume for the year.

All told, according to RCA, 2020’s investment market for commercial properties could have been far worse. The 64% year-over-year plunge in deal volume the market experienced during the second quarter was sharper than the gradual slowdown seen in the aftermath of the global financial crisis of 2007-2008. But while that dip in volume continued to worsen over the subsequent year, the current market so far hasn’t that kind of corrosion as the rate of decline moderated in ensuing quarters.

“The market,” RCA economists declared in the report, “is not yet out of the woods, but it seems that some of the worst fears were not realized.”


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