Commercial property transactions in US plunge 71% in April

Los Angeles

SALES of US hotels, offices, malls and other commercial real estate plunged 71 per cent in April to the lowest level in a decade, as the coronavirus shut down large parts of the economy, Real Capital Analytics Inc (RCA) has said.

Transactions fell to US$11 billion, the smallest volume since April 2010, said a report by the New York-based firm on Wednesday. Hotel deals led the collapse, plummeting 98 per cent from a year earlier. Office and industrial deal volume fell 60 per cent from a year earlier.

A team led by senior vice-president Jim Costello said in the report: "Liquidity in the hotel market has all but evaporated.

"Sales began dipping even before the Covid-19 crisis hit, and, pummelled by the economic shutdown and travel bans, only eight hotels changed hands in April. This is the fewest number of hotel transactions recorded in any month in the history of RCA's coverage."

Other report highlights: The speed of the pullback in liquidity is likely to help investors find a floor for prices sooner this cycle.

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The excess of dry powder should also shorten the recovery period. It took six years for prices to bounce back after the 2008 Wall Street crisis.

Prices have held up so far, with an index of industrial, office, retail and apartment properties 6.5 per cent above year-ago levels.

Non-bank lenders are likely to face the largest losses this cycle, because they furnished a bigger share of capital than in the last crisis, when commercial mortgage-backed securities suffered the biggest losses. BLOOMBERG