Commercial real estate sales plummeted in February of 2016 according to data released by Real Capital Analytics Inc. This potentially signals a peak to the six-year bull market for commercial real estate - which has surpassed pre-recession commercial real estate prices.
The firm cited a 47% drop in sales year-over-year. Specifically, February 2016 sales came in at only $25B vs last year's $47.3B at the same time. Commercial real estate prices have also fallen for two straight months; this hasn’t happened in over six years. This shift in commercial real estate sales and prices have investors wondering if this was a one-time occurrence, or a glimpse into the future of what lies ahead for commercial real estate in the months to come.
Annual 2015 data has just come in…displaying another strong year for commercial real estate returns. According to MSCI Real Estate’s Quarterly Property Index, which tracks about $280B in assets, commercial real estate ended Q4 2015 strong with a 2.6% gain on directly held standing property investments. In layman's terms, asset appreciation and property income showed up big time. MSCI’s total return for all of 2015 came in at an astounding 12.4%.
Industrial properties outperformed the index with a total return of 14.7%, while residential properties lagged vs. the benchmark - coming in at 10.3% for 2015. Interestingly enough, industrial assets have been outperforming for five years in a row now. Other asset classes like equities and bonds posted gains of just below 2% for 2015.
It’s no wonder investors have been lining up to add commercial real estate to their portfolio.