After a record-setting December – which propelled fourth quarter sales, overall volumes were due for a cooldown. Preliminary Real Capital Analytics data shows just that, with first quarter volume of $96.7 billion declining 41% from year-end. As a flurry of deals typically gets done at year-end, first quarter volumes have declined an average 22% over the prior quarter since 2002. And as recently as the first quarter of 2019, sales volumes fell 35% from the prior year’s fourth quarter. Point is, this was expected and a first quarter volume drop is normal. Further, this data is preliminary, and over the past three quarters, RCA has revised volume up by an average of 40%. To start this year, total sales volumes were well ahead of sales in the second and third quarter last year, in the throes of the deepest market uncertainty. March volumes were 11% above last March, indicating markets are healing and investors are signaling readiness to buy.

First quarter office volume totaled $20.5 billion, and lab sales, particularly in Boston, have been major drivers. In fact, Boston sales volumes were $5.1 billion in the first quarter, as BioMed purchased a portfolio of lab/life science assets heavily concentrated in Cambridge and Alexandria acquired an underway lab building, development site, and existing asset (with plans to convert space over time) in Boston. These were the two largest deals of the quarter nationwide. On the West Coast, KKR acquired The Exchange on 16th in San Francisco, built in 2018, from Kilroy for nearly $1.1 billion ($1,442/SF). This is reportedly the highest price per square foot for an office asset in San Francisco history. Demonstrating the resiliency of office pricing, Mapletree Investments acquired Uptown Station in Oakland for $419 million ($1,098/SF). This property was under agreement for a reported $405 million as the pandemic struck, but market uncertainty scuttled the deal. Just one year later it sold for 3.5% higher than pre-COVID pricing.

Industrial sales volume came in at $19.6 billion in the first three months of the year, in line with that in the first two quarters of 2019. Recapitalizations have driven sales so far in 2021; in fact, the four largest deals of the year have all been recaps. LBA Realty has recapitalized three different portfolios, with GIC and BREIT (twice), while WPT Industrial REIT partnered with IMCO on 13 assets. Pricing, meanwhile, has continued to rise. RCA is reporting a record-high price of $124/SF, continuing more than a decade of price appreciation.

Multifamily remains the most liquid property type, with $35.5 billion in volume in the first quarter, not far off from that in the first quarter of 2020. Once the data settles, it would not be surprising to see higher volumes than those early last year. Headline deals to start the year include Star Real Estate Ventures’ sale of 14,414 units in 50 properties to Morgan Properties and Olayan Group for $1.75 billion. Tricon recapitalized a 7,289-unit portfolio (it will retain a 20% interest) for $1.33 billion. Multiple Phoenix-area trades this year rank among the largest deals done, with cap rates creeping toward 4% on a couple. This is just one example of low cap rates across markets, as investors are still hungry for multifamily product.

Retail remains a largely challenged asset class, based on sales volume. Retail volume did not increase while that of other asset classes grew substantially in the first quarter compared to the second and third quarters of last year. Preliminary volume to start 2021 is broadly in line with third quarter 2020 levels and about half the volume in the fourth quarter. Some of the largest retail deals so far this year were parts of portfolios. Brookfield Property Partners purchased a three-property portfolio in Mountain View, CA, from Merlone Geier Partners, headlined by an office asset. However, the portfolio’s storefront retail, along with a theater and a retail box at the ground level of a hotel, drove the price to a total $144.8 million. The retail portion of The Crescent in Dallas, TX, sold for $141 million to Crescent RE Holdings and Goff Capital Partners. With half the U.S. adult population receiving at least one vaccine shot and retail spending surging, retail sales volumes should follow in a matter of time.

Total volume of hotel transactions remains low but has been improving quarter-to-quarter. Big transactions are swaying the stats: Colony Capital sold a 55% interest in 197 properties to Highgate Holdings and Cerberus for $2.8 billion. This has pushed first quarter volume ahead of year-ago levels for the only asset class that can claim such a feat. These volumes should only continue to rise, as Blackstone and Starwood Capital are acquiring Extended Stay America and all 564 properties (62,500 rooms) for $6 billion. From there, however, volumes are likely to cool, as these two transactions are among the largest on RCA’s sales rolls.