key Takeaways from the Commercial Real Estate Report (november 2024)
Hear’s a summary of the key findings from the CNBC/Moody’s report on commercial real estate transaction volume in November 2024:
Overall Market:
* significant Decline: Transaction volume was down 10% compared to november 2023, totaling just 1,800 deals. This is the first year-over-year decline as the recovery began in early 2024, and lower than November 2020 (the start of the COVID pandemic).
* Factors Contributing to Decline: Higher interest rates, policy uncertainty, a weak labor market, and caution from lenders/investors are driving the slowdown.
* Liquidity Still Exists: Despite the decline, market liquidity remains at two-thirds of pre-pandemic levels, focused on larger deals.
Trends in Deal Size & Quality:
* Shift to Larger Deals: Investors are prioritizing larger-scale, higher-quality assets (Class A).
* Increased Average Deal Size: The average deal size rose to $14.2 million in November, up from $12 million since the start of 2019. Deals over $100 million were up 51% year-over-year.
* “Late-Cycle Barbelling”: Focus on durable trends like housing, logistics, and digital infrastructure.
Sector Performance:
* Multifamily Leads: Multifamily accounted for the most transactions (20).
* Office Market Adjusting: The office market is “loosening” with a more efficient pricing process. Deals are driven by:
* Mission-critical facilities/specialty use.
* Conversion opportunities.
* Discounted prices. (e.g., 114 West 41st St. in NYC sold at a 53% discount)
* Strategic Office Purchases: Companies are seeking control and discounted prices, leading to direct purchases like Novartis, First Citizens, and Alo Yoga.
* Medical Office Strong: Medical office properties are experiencing high demand and activity (though not included in Moody’s core count). A $7.2 billion portfolio sale by Welltower to Remedy Medical Properties and Kayne Anderson Real Estate was the top sale of November.
* Portfolio Deals Increasing: Large portfolio deals are becoming more common, representing 17 of the top 50 deals in November.
In essence, the report paints a picture of a cooling CRE market, with investors becoming more selective and focusing on quality, scale, and sectors with strong fundamentals.