- The investment sales market appears to be at an inflection point.
- Sales volume in Q3 was flat compared to 2023, and year-to-date activity is in line with the prior year’s level.
- Office and multifamily posted the most significant year-over-year increases in volume, while hospitality was flat.
- Industrial volume was down slightly at 2%, while retail showed the largest pullback, down 27%.
- Data points to steadying market conditions, suggesting a rebound is just around the corner.
Investment sales activity has shown promising signs of stabilization. Volume increased year-over-year in Q2 and was flat in Q3. After additional deals are added to the investment sales rolls, this will mark the first back-to-back positive showing since early 2022. While some noise in the data is likely in the coming months and quarters, conditions suggest that the worst is now over, the market has found its footing, and recovery is set to begin.
Aaron Jodka
Conditions suggest the worst is now over, the market has found its footing, and recovery is set to begin.
Office
Office volume has started to rebound after several quarters of tepid activity. Investment volume increased 13% compared to this time last year, the best of any asset class. Suburban activity has held mostly steady, while CBD volume has ballooned 79%. To be fair, CBD sales in 2023 Q3 were the lowest of the cycle and reminiscent of some quarters coming out of the Global Financial Crisis. With office fundamentals stabilizing, investors can more comfortably call a bottom.
Industrial
Sales volume is showing clear indicators of stabilizing. Quarterly sales are in line with this time last year and up slightly from Q2, led by warehouse transactions. With an average of $23 billion in deals over the past two quarters, volume isn’t too far off from 2018 levels and exceeds 2014-2017 averages. Unlike some other asset classes, the number of transactions is stable and slightly increasing. Industrial has been an investor favorite, and as fundamentals strengthen, sales activity should pick up quickly.
Multifamily
Multifamily remains the perennial leader in investment sales volume, ending Q3 up 9% year-over-year, the second consecutive quarterly increase. Sales have averaged $38.3 billion over the past two quarters, aligning with 2017 levels. While a far cry from the height of the post-pandemic era, this shows that the market is functional and remains liquid, especially on a market-by-market level. Year-to-date activity posted records in San Francisco and Boulder, CO.
Retail
Headlines suggest that retail is facing the most substantial pullback in sales activity of all asset classes. While this is technically true, it is worth noting that Q3 comparisons have a significant caveat: a large entity transaction in 2023 sent volume soaring. However, when excluding entity deals and comparing more typical single-asset and portfolio deals, retail volume is up on a year-over-year basis. Non-entity activity has been stable since the start of 2023.
Hospitality
Hospitality volume was consistent with last year’s activity, but the makeup of that volume has shifted. Full-service properties are up 53% over the past year, while limited-service properties are down 35%. This trend matches the shift in travel demand and corresponding property performance metrics. Large single-property deals continue to be major drivers of overall activity. Through the first three quarters of the year, the New York City Boroughs market has posted record sales volume, the only market in the top 25 to do so.
