- Commercial real estate transaction volumes of $254.25B for year's first seven months, fell 15.4% from the same period in 2015, according to Real Capital Analytics (RCA). In July, $30.08 of deals was down 25% from a year earlier.
- Cap rates (except for hotels), however, continue to slide.
- As to whether there's a bubble, CBRE's (CBG) Spencer Levy says no. as fundamentals across markets and asset classes remain strong. Levy also cites an influx of foreign buyers, noting their cost of capital is low and they're patient investors (but don't foreigners always pour in at the top?).
- Canaccord's Ryan Meliker isn't so sure about a non-bubble, noting teeny cap rates are a function of invisible interest rates. If rates can't stay low forever, than cap rates have to rise.
- One major source of demand has backed off: U.S. REITs' purchase volume fell 64% Y/Y in the first half vs. an 11% increase for institutional investors.
- RCA's Jim Costello sums up the bull case: Would an investor rather buy European bonds with negative yield, stick money in a bank vault, or buy some apartment towers which may face plenty of competition, but still generate some return on investment.
- Source: SNL Financial's Tom Yeatts, Jake Mooney and Chris Hudgins
- Tickers of note: WD, HF, STWD, MMI