Investment Market Strengthens

The July report from Real Capital Analytics lays out just how rapidly the investment market is advancing. A few of the highlights:

  • Transaction volume of deals greater than $5 million topped $51 billion in the second quarter and $82 billion through the first half of 2010, up by 132 percent and 116 percent, respectively, over the same periods last year.
  • New mortgage defaults, foreclosures and transfers into special servicing during the second quarter slowed to their lowest level since the recession began. Moreover, lenders are less likely to kick the can down the road; there are fewer loan modifications and more sales, a sign of improving market conditions.
  • RCA cites the return of large portfolio sales, a sign of more risk-taking as investors buy properties in bulk versus cherry-picking the best deals. Portfolio sales totaled $17.5 billion in the second quarter, led by Blackstone’s $9.2 billion acquisition of Centro.

  • Investors continued their love affair with core properties in primary, supply-constrained markets, but their appetites for riskier assets are growing as yield fatigue sets in. Markets that had been lagging recorded some of the largest year-over-year gains in transaction volume, including Atlanta, Phoenix, Las Vegas and Philadelphia. Tertiary markets recorded larger year-over-year gains than either primary or secondary markets
  • Prices were stable or improved over the quarter with cap rates averaging in the 7s for most property types and 6.4 percent for apartments. Since the second quarter of 2010, cap rates have tightened by 30 to 100 bps across the property types.
  • Want more good news? The Conference Board’s index of leading indicators rose 0.3 percent in June. The recovery has slowed in recent months, but the outlook remains intact for continued growth in the second half of the year.