Improved Investment Activity in Q3 Still Less Than Half of Pre-Pandemic Quarterly Average Since 2015

  • Q3 investment volume1 decreased by 60.4% year-over-year to $61.3 billion. Single-asset sales, which are a better indicator of market demand, held up slightly better, decreasing by 53.4%. Although total activity increased by 33.9% from Q2, logistical challenges and market uncertainty from the COVID-19 pandemic continued to limit the number of completed deals, particularly those with higher prices.
  • The hotel sector had the largest year-over-year decrease in total investment volume (-84.3%), while multifamily had the smallest at -50.9%. Industrial volume decreased by 64.5%, largely due to a drop in portfolio sales from record-high levels in Q3 2019. For single-asset sales only, industrial had the smallest decrease by a significant margin (-27.9%). For other sectors, decreases in total and single-asset investment volumes were similar.
  • Cross-border investment fell to $2.6 billion in Q3, down by 12.2% from Q2 and by 70.8% year-over-year.
  • Class A cap rates were largely stable across most property types and markets, according to CBRE’s Q3 2020 Cap Rate Survey. Transactional cap rate changes ranged from a decrease of 7 basis points (bps) for retail to an increase of 19 bps for office in Q3, although cap rate movements were not necessarily meaningful due to the relatively small number of completed deals compared with pre-COVID levels.
  • The total annual NCREIF return slowed further in Q3 to 2.0%, its smallest quarterly rate of increase since 2010. The tepid growth was primarily attributable to negative appreciation, which declined for the second straight quarter (-2.2%), while income returns remained relatively stable. Industrial was the only sector with higher appreciation (5.4%), which led to a total return of 10.1%.

1 All references to deal volume cited in this report are based on Real Capital Analytics transactional database, which includes entity-level and excludes development site transactions