exceed those in 2015, according to stats from Newmark Knight
Frank’s Greg Leisch, senior managing director of market
research with the firm. Compare that with New York City’s
investment sales for office, which are down about 40% Y-O-Y,
according to NKF’s Sandy Paul.
Of course, Q4 sales need to be tallied up and if past history is any
guide, brokers will be working until the midnight hour on New
Year’s Eve to close out the books. Unfortunately, some of the trends
that weighed down on sales in the first half are still present and will
likely continue through the beginning of 2018.
There are still worries about macroeconomic events, although
Leisch, for his part at least, dismisses these as so much white
noise. “There will always be reason for hesitation,” he says.
“Each year we find a new reason—the Dow seems too high, or
we have a new administration, or there’s concern over the deal
with Iran, or saber rattling with North Korea.” There will always
be reasons for hesitation in the market, he reasserts, and there
will always be that one-quarter turn in sales that were lower than
expected and disappoint.
Another nettlesome trend still present in the market: buyers and
sellers are still at loggerheads about pricing, says Green Street
Advisors analyst Joi Mar. “Investors are weighing record prices,
slowing property fundamentals, Fed tightening and uncertainty
around policy reform—especially taxes,” she says. There are also
structural changes under way in some asset classes such as retail.
“Most, if not all, of these issues are likely to bleed into 2018.”
What is likely, she predicts, is that sellers will move toward the
bid price. That’s what usually happens—instead of the other way
around—since buyers aren’t pressured to transact, while sellers
may need to exit.
So far, though, that has shown little sign of occurring.
In October the Green Street Commercial Property Price Index
declined by 1%. Y-O-Y, the index was also down by 1%, while over
the trailing three months, it was flat. Still, the firm cautioned
against making broad assumptions from this drop. The index, it
turned out, was pushed down in October by falling mall valuations. Prices for most other property types were stable.
“In aggregate, prices have plateaued, but it’s really a mixed bag
when it comes to property pricing,” says Peter Rothemund, senior
analyst with Green Street. “Industrial, medical office, life science—
they’ve all done great over the past year. Malls have been weak. And
everything else has been somewhere in between.”
SIGNS OF HOPE
All that said, there are signs that this pause in investment sales—
and the trends driving it—may end in 2018 or, at the very least,
improve. For starters, by the beginning of the year it will be clear
whether Congress will be able to pass some version of tax reform.
The market will then know and be able to proceed with plans
and, hopefully, purchases.
Also, fundamentals in the second half of the year have turned
out to be surprisingly strong, leaving many in the industry to conclude that the cycle is positioned to continue longer than was
thought at the beginning of the year.
Real Capital Analytics made this observation in its third-quar-ter US Capital Trends Report. Deal volume as of Q3 was the most
challenged “in sectors where unique stories on market dynamics
are forcing investors to reassess their assumptions. By contrast,
the last downturn impacted all property types and deal structures
by impeding financial channels.”
Zavazone is emblematic
of an experience retailer.
Participating in experiences, as opposed to
acquiring things, are
part of the changing