09 Aug 17 By Cole Flanagan, CPA, MBA No Comments

The Top 10 Markets for Investment Sales

The top 10 markets with the highest first half of the year sales volume include the following:

Certainly, that doesn’t show a precipitous drop. However, there are several factors contributing to that slowdown. “You can’t ignore the fact that we are in an environment where there is more uncertainty,” says Sean Coghlan, director of investor research with real estate services firm JLL. Elevated political risks, regulatory risks, rising interest rates and geopolitical issues are among the top concerns. JLL is reporting a bigger decline in first half of the year investment volume of 13 to 15 percent across the four major property types of office, industrial, retail and multifamily. (RCA also tracks hotels and development sites.)

There is a shortage of opportunities that is happening at the same time as buyers are becoming increasingly selective. “So we are seeing a little bit of an imbalance between the supply side and the demand side of capital,” adds Coghlan.

“I believe that there is still a lot more equity demand than there are deals out there,” notes Michael T. Fay, a principal and managing director in the Miami office of real estate services firm Avison Young. Pricing has become much more of a factor today. “There is a pricing gap between a seller’s expectations and where underwriting has come in on some of these properties,” he says.

The one sector that is out-performing is industrial. According to RCA, industrial sales increased 10 percent during the first half to reach $30.1 billion. “A big factor in that is that we are seeing a wave of new portfolio transactions that are over $250 million,” says Coghlan. According to JLL, an estimated $3 billion in industrial portfolio transactions have closed in the first half of the year and over $13 billion in portfolio sales are expected to close in the second half of the year.

Hotel sales remained flat, while other major property sectors also posted a drop in sales, led by development sites that fell by 20 percent; followed by apartments at 17 percent; retail at 16 percent and office at 2 percent, according to RCA.

Even with a decline in transaction volume, sales remain relatively robust in most major metros. Combined, the top 10 most active sales markets during the first half of the year accounted for 35 percent of total sales at $74.4 billion. The top 10 markets with the highest first half of the year sales volume include:

Los Angeles
The $12.60 billion in total sales the city saw in the first half of 2017 is down 11 percent year-over year. Two of Los Angeles’ largest deals were the sale of SunAmerica Center and One California Plaza. Blackstone sold its two-thirds ownership share of SunAmerica Center to JMB Realty Corp. for an undisclosed price, while One California Plaza sold for $459 million.

Manhattan, N.Y.
Larger gateway markets continue to generate big sales volumes. The one market where there has been a notable drop-off is in New York City. Although Manhattan continued to see some mega deals during the first half, the $10.62 billion in total property sales is down 55 percent year-over-year. One notable big sale during the period was the $2.2 billion deal for 245 Park Avenue.