Current Status: U.S. commercial real estate transaction volume reached a record-high in 2018, rising to $573 billion – a 17.1% increase from 2017. The rise can be attributed to both higher individual asset and portfolio sales, as well as a spike in M&A activity. The rise in transaction volume was led by industrial property sales, which increased by 32% y-o-y. Retail property sales rose by 35% y-o-y, but this surge was fueled largely by a number of high-profile entity sales.
Outlook: Since market conditions are expected to remain on a solid footing through the near term and as real estate remains attractive relative to other assets classes, transaction volume should stay at elevated levels.
YoY from Q4 2017
Current Status: According to the Fed’s most recent Senior Loan Officer Opinion Survey, commercial lending standards tightened from three months ago, while demand for commercial mortgages showed a modest decline. Overall, heightened competition for loans has forced some traditional lenders to move up the risk curve, financing more transitional assets in secondary markets and eliminating lender protections.
Outlook: Going forward, tighter loans spreads and the intensifying competition to place debt will drive lenders to offer a wider variety of loan products and increasingly take on greater risk in order to achieve previously expected returns.
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