Commercial deal volume through Q3 hits all-time high

Commercial-property sales through the first three quarters of this year reached an all-time high , continuing the big rebound from the pandemic-driven lows the industry saw last year. Maybe just as notably, the surge to a new record peak (at least so far) has been driven by different sectors than in previous surges.

Sales through the first nine months of 2021 totaled $462.1 billion , according to Real Capital Analytics (RCA). This figure was bolstered by $193 billion in deal volume during the third quarter alone, including $179.4 billion across major sectors (office, retail, industrial, hotel and multifamily), the most ever for these five segments in a single quarter. The previous quarterly five-sector record of $170.5 billion was set in the final three months of 2019.

This year also marks the first time that commercial deal volume in the first three quarters of a year has eclipsed $450 billion. The last time that sales even approached this figure was in 2007, when volume was at $448 billion through September.

Back then, office and retail properties were driving the boom, but this year, multifamily and industrial have led the charge. These two sectors combined to comprise 59% of deal activity since the start of the year, including 62% of all volume in the third quarter alone.

Apartments have been particularly strong. In Q3 alone, multifamily properties had a record deal volume of $78.7 billion, a level higher than the average annual totals from 2008 to 2011. The quarterly level of multifamily activity shattered the previous all-time high of $63.4 billion set during Q4 2020. From January through September of this year, volume in this sector was at $178.5 billion — more than twice that of the office market and more than four times that of retail. Year over year through the third quarter, multifamily transaction volume was up 115%, although this gain is inflated by the pandemic-impacted lows across the sector in 2020.

Industrial properties, meanwhile, recorded $94.8 billion in deals from January through September, up 48% year over year. This segment posted an impressive third quarter of its own, with quarterly deal volume of $39.5 billion, the third-highest quarterly total on record for industrial assets, per RCA data.

The recent shift in priorities among investors also has come with a change in the dominant deal structure. Office and retail acquisitions often involve entity-level investment, and indeed, nearly 20% of the then-record activity through the first three quarters of 2007 was comprised of one-off, entity-level deals in these two sectors. This year, however, the rise of individual asset sales has been the foundation of the larger market rebound.

Single-asset deals have been the strongest growth source for both the industrial and apartment segments on a year-to-date basis. Overall, single-asset sales through the third quarter were up 130%. Part of this jump, again, can be attributed to last year’s weakness in commercial real estate, but even relative to pre-pandemic levels, singular-asset activity has been strong. Compared to the first three quarters of 2019, for example, individual asset sales have been 29% higher in 2021.

This year’s strength of single assets implies that the market has more solid underpinnings now than it did in 2007, RCA suggested.

“Individual asset sales represent buyers underwriting the health of the market one deal at a time,” the company noted in its U.S. Q3 2021 Big Picture Capital Trends report. “By contrast, entity-level sales come and go, often based on temporary quirks in financing costs and public-to-private arbitrage opportunities.”


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