October 30, 2020
Few would dispute the argument that the current investment sales market is quite different from what we saw prior to the onset of the COVID-19 pandemic. However, even in the (temporary) “new normal” of the past eight months, the market has evolved, according to CREXi, which reports shifting behavioral patterns among sellers and buyers alike, based on the listings that appear on its platform.
During the third quarter, CREXi says in a new white paper, “we observed the average asking price per square foot for new listings rise by 3.18% with a simultaneous 19-basis-point contraction in cap rates. This increase in sellers’ value estimates indicates a returning confidence in the commercial real estate market six months into the pandemic.”
Early numbers for Q4 suggest a continuation of this trend. “As the economic landscape post-COVID becomes more predictable, sector confidence and CRE transaction volume are slowly returning to pre-pandemic levels,” says CREXi.
Another marker of returning confidence is the number of new listings added to CREXi in Q3. Compared to Q2, the platform experienced a 10% increase in the total of new property listings for sale. CREXi says, “Where sellers were holding onto their assets and took a ‘wait-and-see’ approach earlier in the pandemic, more entities are now choosing to list their assets proactively.”
Confidence doesn’t preclude caution, though, and CREXi notes that brokers and sellers across the commercial real estate spectrum continue to list their assets unpriced at high numbers. Throughout Q3, the total amount of unpriced properties rose from 11.24% in July to 15.01% in September.
“This amount of new, unpriced listings was just shy of its 16.52% May high in Q2 but indicates a returning, creeping uncertainty in market values,” according to CREXi. “More and more, property owners are selecting to strategically lead interested demand further along the sale process before discussing pricing.”
On the buyer side, CREXi points to an uptick in activity. Total buyer activity increased steadily every month since April of this year, with an overall increase of 29.9% from Q2 to Q3. “We also observed buyers on CREXi become more engaged in their searches: buy actions per individual users were up 4.05% from the previous quarter, pointing to increased intent towards purchase compared to earlier in the pandemic,” according to the white paper.
Across every property type, CREXi saw growth in buy actions during Q3, ranging from 13% for hospitality assets to a 34% jump in the industrial sector. “As a further indicator of positive market sentiment, interest in loan and note sales decreased 61% from Q2 to Q3.”
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