The coronavirus pandemic sent commercial deal volume into a nosedive in 2020’s second quarter, with volume plummeting to $44.7 billion, the worst performance for any second quarter since 2009.
That’s according to Real Capital Analytics’ (RCA) recent U.S. Big Picture Capital Trends report, recapping the second three-month set of the year. The second quarter’s transaction volume is down 68% from the same quarter one year prior, and the 3,338 properties that changed hands during 2020’s second quarter is down 62% from the number of properties involved in deals during Q2 2019.
Activity plunged across all major property types. The industrial sector fared best among asset classes; while the second quarter saw the sector’s deal volume slashed in half year over year, industrial activity remains on a 17% growth rate for the first half of the year, though that’s due chiefly to two large portfolio acquisitions by Prologis in the Dallas metro area in January and February. Industrial property prices grew at a 7.6% year-over-year clip during the second quarter, helping maintain overall commercial property price growth at 3.6% year over year, a step down from the first quarter’s 5.4% annual gain.
On the other end of the spectrum is the hospitality sector, with the 68 hotel transactions closing between April and June representing the fewest such deals in any second quarter on record. Clearly, the coronavirus outbreak’s toll on travel has dented the segment’s near-term viability. The turmoil is also reflected in hotel property prices, which were 5.4% below last year’s level during the second quarter.
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The two aforementioned Dallas deals helped push the metro to the top spot among U.S. commercial property markets midway through 2020. With a sales volume of $9.25 billion, Dallas handily eclipsed heavyweight markets like Manhattan ($7.77 billion), Los Angeles ($7.08 billion) and Boston ($6.97 billion) to claim the mid-year crown.
Boston was the top market in the second quarter to vault to fourth on the list for 2020’s entire first half. None of Boston’s Q2 transactions were portfolio deals, reflecting a second quarter in which portfolio deals generally vanished throughout all metros, dropping 77% year over year nationwide.
And as with asset classes, activity plunged across geographic markets. Boston aside, the commercial market players that remained active during the second quarter injected their capital into areas outside of major metros. Consider that just one of the country’s top 25 markets logged positive annual sales growth in the first half of the year: 23rd-ranked Raleigh/Durham, which saw a 15% gain propelled by two one-off transactions.
While purchase activity lagged, refinance movement has performed relatively well, considering the COVID crisis’ impact. Refi activity across every asset class was down some 35% annually, Real Capital Analytics reported.
