The impact of the COVID-19 crisis continues to be felt within commercial real estate during October, with transaction volume dropping annually at a double-digit rate for the eighth straight month.
That’s according to Real Capital Analytics (RCA), whose Capital Trends U.S. Big Picture report revealed just $26.2 billion in deal volume during October — a 52% plunge in volume year over year.
Deal volume, RCA noted, continues to be negatively affected by the impasse between property owners and potential buyers regarding pricing expectations during the current pandemic. Buyers are still seeking steep discounts to enter the investment fray, but current owners, disinclined to taking losses in the tough environment, aren’t budging much if at all — and according to RCA, the gap between buyer and seller expectations is growing in some sectors.
Consider retail. Prices in the sector have been on the way down, with RCA’s Commercial Property Price Index (CPPI) for retail falling 5.2% annually in October. That decrease, however, hasn’t been enough to urge buyers to leave the sidelines to sift through the segment’s mounting distress. Deal volume in retail reached a paltry $1.4 billion in October, a 73% plummet from the same month last year. Year-to-date, retail has seen $26.8 billion in transactions through October 31, an annual fall of 47%.
Lodging, which continues to suffer the effects of decreased travel, continues to see the biggest yearly drop in transaction volume. The hotel sector saw just $600,000 of investment in October, a year-over-year drop of 84%. To date in 2020, hotels have seen just $8.5 billion in deal volume, down 71% from 2019.
Other sectors are closer to seeing a light at the end of the tunnel. Industrial, for example, saw $4.9 billion in sales volume in October — still down 55% year to year and down from also strong 2018, but close to levels seen from 2013 to 2017.
Office and multifamily, like industrial, are also seeing deal volume fall less of late than earlier during the pandemic. The office sector posted deal volume of $6.9 billion in October, down 46% annually, while apartments logged $11.2 billion in October sales, down 41% year over year.
Prices for the three sectors are also faring relatively better as transaction volumes show early signs of normalization. Industrial prices, according to the CPPI, are up 8.5% year over year in October, with apartment prices up 7.2%. Office prices remain 0.9% below last year, although the sector’s prices haven’t sunk at the same sharp rates as those in retail or hospitality.