Colliers International Group Inc. (Nasdaq:CIGI) (TSX:CIG) has issued its 2nd Quarter 2015 U.S. Capital Flows Research report, which shows a 38 percent year-over-year increase in commercial property sales for the first half of 2015, on a volume of $258.3 billion. While the analysis of data from Real Capital Analytics shows quarterly declines in transactions – down 11 percent from Q1 2015 – Colliers cites potential for a record year.
“In light of the heated levels of activity in the first quarter of the year, we are seeing modest decreases in Q2 transactions across most property types, with only development land showing a quarterly increase of nine percent,” says Brian Ward, President, Capital Markets & Investment Services | Americas. “However, we are experiencing a healthy pace that, should activity continue at current levels, will set a record for total transactions during an already noteworthy year; Q1 set a record in cross-border activity with $22.2 billion invested across all major property types.”
Key takeaways from this report include:
- Quarterly volume declines speak more to lack of supply than lack of demand. Though hungry, investors are still selective, and assets are getting pricier in some key core markets making prime acquisition targets harder to come by. Office trades were down barely 1 percent and multi-family down just 9 percent. Single-property transactions were up 1.4 percent overall, while multi-property portfolio and entity level transactions saw decline.
- Cross-border investment activity robust, despite quarterly declines. On a quarterly basis, cross-border investment is down 34 percent, but year-over-year investment is up almost 80 percent. Cross-border activity represents 13 percent of closed deals in 2Q, still above the five-year average of 10 percent.
- International investors continue to place more than 50 percent of investment dollars in the top 6 U.S. metros. Manhattan remains the top target of global capital drawing over $4 billion this quarter across all property types. Chicago also saw significant trades, totaling more than $1 billion.
- Canadians remain top U.S. investors. Canadian capital continues to seek opportunities in traditional gateway cities, as well as more opportunistic markets, with Manhattan, San Diego and Portland, the top markets by volume this quarter.
- Significant entity and portfolio deals may have declined, but still remain abundant. Leading the way is the nearly $6 billion portfolio of 231 primarily warehouse properties bought by Prologis and funded by Norwegian sovereign wealth and pension fund dollars.
- Non-traded REITs trading, as well. On the office side, a non-traded REIT operated by LA’s Griffin Capital gave $607 million to non-traded colleague, Signature, for a national portfolio of suburban office properties totaling more than 2.6 MSF.
- Seeing another year of increased issuance of public debt. So far for CMBS, 2015 issuance is approaching 60 percent of 2014’s $100 billion in lending. While the 2014 total is just over 50 percent of the 2007 global market peak, U.S. CMBS issuance of $94 billion in 2014 is approaching 70 percent of the prior U.S. peak.