Transaction volume exceeds expectations in first quarter 2018

Transaction volumes exceeded expectations in the first quarter of 2018 with 4.7 percent year-over-year growth, according to JLL’s Q1 2018 United States Investment Quick Look. In total, $98.7 billion in trades took place across commercial real estate with the industrial, multifamily and hotel sectors outperforming and driving growth. Yet, selectivity prevails and investors remain disciplined.

The industrial sector outperformed the broader market by dollar volume with first quarter activity increasing 20.8 percent year-over-year to $15.9 billion, marking the second strongest start to a year on record for the sector. Hotel activity also grew significantly as transaction volume shot up 78 percent year-over-year, boosted by portfolio activity and ongoing interest from offshore investors.

Multifamily also experienced another surge in transaction volume, growing 32.2 percent year-to-date and leading all sectors for the fifth consecutive quarter at $33.7 billion. In the office sector, the prolonged period of cap rate compression is testing investors’ ability to achieve yield and the sector posted a 5.6 percent softening in volumes. While retail investment declined notably, large in-progress portfolio deals are expected to boost full-year activity considerably.

“The U.S. economic outlook is increasingly favorable,” said Jonathan Geanakos, president, JLL Capital Markets, Americas. “However, we expect overall investment into commercial real estate in 2018 to decline in favor of debt and M&A as underwriting remains disciplined.”

Dry powder for acquisitions increased by 15.9 percent in the first quarter, growing to an all-time high of $175 billion, but the allocation and redeployment of capital remain key areas of concern for investors underwriting acquisitions at current pricing. The bid-ask spread remains throughout and will hamper meaningful growth in activity in the near-term.

To read the report, click here.