Commercial Real Estate Transactions in the Dumps
I’ve always felt that transactional activity is the real indicator in any market. Is the market getting better? Getting worse? What direction is it likely to take? Look at the transactional activity. Transactions are like the canary in the mine. If the market is going to take a nosedive on values, transactions will seize up first.
Real Capital Analytics (www.rcanalytics.com) tracks data for net investment activity in the four major space types. The graph below speaks for itself.
Beyond their role as a leading indicator, transactions also act as sort of a psychological indicator. If you want to know how the various real estate actors are feeling about a market, look at transaction activity. Buyers get enthused when transactions pick up. It tells them that they aren’t alone in seeing opportunity in a market. Sellers begin to feel hopeful that maybe their property isn’t a lost cause. As transaction activity picks up, so do prices.
So where are we today? I’m really probably not qualified to answer that question. But I think the graph does. The market is in the absolute tank. When your market is worse in terms of total transaction activity than the post-9/11 period, you know it’s bad.
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