Investor belief in commercial real estate’s continued success is obviously not waning, as parties are paying increasingly more for properties over the last year, according to a recent Real Capital Analytics (RCA) report.

The increase is happening on top of last year’s near-record transaction volume.

It said that the U.S. National All-Property Index recorded a 7.2 percent year-over-year gain in pricing in May and a 1.1-percent rise from April. 

Not surprisingly, the industrial sector was the strongest, rising 1.5 percent from April, but though its values were on the rise, deal volume has decreased, likely due to the strong competition in the market for good assets and a lack of major portfolio trades so far this year.

But when Blackstone’s $18.7-billion purchase of GLP closes later this year, that volume registered is expected to tick upward. That transaction, totaling 179 million square feet of assets, will nearly double the size of the latter’s current industrial portfolio.

But even without that, industrial is still riding a good wave. Demand this year in the United States is forecast at 57 million square feet per quarter, according to a NAIOP report (download here). 

In the first quarter, according to Cushman & Wakefield’s assessment of the period (download here), there was 25.8 million square feet of space absorbed, down drastically from the 63.3 million square feet taken up in Q1 2018. Much of that was due to a delay in the completion of new developments due to challenging weather. However, vacancy in many markets was historically low, and overall space available was just 4.9 percent, slightly down from five percent in the same period in 2018.

Multifamily, retail and CBD office also saw rises in transaction prices, according to RCA.

Meanwhile, suburban office saw a slide, as it has since August 2018, according to RCA. That’s in spite of the asset class reportedly posting a rebound from a CBD office preference by investors over the last several years. The shift was taking place because more Millennials were starting families and moving to the suburbs, with employers following.

In the office arena, Cushman’s report on the first quarter (download here), rent growth was up 3.9 percent year over year, besting a 1.9-percent jump during the same period in 2018. And vacancy was about the same, at 13.1 percent. There was 124.1 million square feet under construction over the first three months of the year, more than 20 million square feet above Q1 2018 levels.

With a continued strong economy, commercial real estate remains a place where investors want to place their bets that the good times will keep pace.

About GRS Group

GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.

Through the company’s proprietary management process, Global Services Connection, GRS Group delivers an integrated suite of services including Financial Advisory, Transaction Management, Assessment and Title Insurance.  We provide a single point of contact, capable of leveraging the GRS Group portfolio of companies and delivering customized solutions to assist our clients in achieving their investment goals.