US commercial real estate transaction volume started the year with a whimper. A new report from Real Capital Analytics shows a 58% decrease in year-over-year transaction volume in January.
The fumble comes on the heels of record activity in December, when transactions volumes increased 8% year-over-year. January experienced similar declines to the second and third quarters of 2020, which directly followed the onset of the pandemic.
Transaction volumes in January fell across property types at double-digit rates, with the exception of senior housing. This was a pivot from December transactions when apartment and industrial sales took off, driving the majority of activity. Even office properties had a good month with the highest transaction volumes since 2019. It should be noted that it is typical to see an end-of-year rush and RCA adds that the activity was likely compounded by investors closing delayed deals from earlier in the year.
While transaction volumes overall surged at the end of the year, it wasn’t enough to offset losses. New York City transaction volumes, for example, fell 50% in 2020, according to research from Cushman & Wakefield, totaling $22.1 billion. This is the lowest investment activity on record since 2010, the pit of the previous recession. Following national trends, transaction volumes also rebounded at the end of the year, up 24% from the third quarter.
Despite the decrease in January transaction volumes, pricing remained stable, according to RCA research. On a 12-month trailing basis, industrial cap rates fell only 20 basis points year-over-year to 6%, and apartment cap rates fell by only 30 basis points to 5.1%.
Similarly, many brokers also had a successful 2020, despite lower transaction volumes. Data from Apto found that 34% of commercial real estate brokers nationwide made more money in 2020 than the year prior; however, 52% of brokers made less in 2020 than in 2019, up from 26% who reported lower year-over-year income in the last Apto survey. Brokers believe that momentum will pick up in 2021 with nearly 75% expecting to make more in 2021 than in 2020. The survey shows strong optimism for activity this year, even despite the slow start in transaction activity.