JLL: First-Quarter Transaction Volume Grows

Transaction volumes exceeded expectations in the first quarter with 4.7 percent year-over-year growth, reported JLL, Chicago.

JLL said $98.7 billion in trades took place across commercial real estate during the quarter. The industrial, hotel and multifamily sectors outperformed to drive growth.

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

JLL said the industrial sector saw its second-strongest start to a year on record as activity increased 20.8 percent year-over-year to $15.9 billion for the quarter. Hotel activity also grew significantly; transaction volume shot up 78 percent year-over-year, boosted by portfolio activity and ongoing interest from offshore investors. The 52-week moving average for hotel occupancy reached its highest point in 10 years, JLL reported.

Multifamily transaction volume “surged,” growing 32.2 percent year-to-date and leading all sectors for the fifth consecutive quarter at $33.7 billion. “Multifamily continues to be a critical driver of transaction volumes across the country even as rent growth is plateauing,” said JLL Americas Senior Director of Investor Research Sean Coghlan. “The asset class is on solid footing as the economy continues to drive demand.”

In the office sector, cap rate compression is testing investors’ ability to achieve yield, JLL said. The sector posted a 5.6 percent softening in volumes. And while retail investment declined “notably,” several large in-progress portfolio transactions are expected to boost full-year activity considerably, JLL said.

Geanakos noted overseas investors remain focused on expanding real estate assets under management in the U.S., but called foreign investment “tepid” at the moment. “As expected, institutional investment from mainland Chinese buyers has slowed considerably,” he said. “However, we expect Asian buyers as a whole to continue to be active, especially as they look to high-quality assets outside of gateway markets in their search for yield.”

Bucking the overall trend, foreign investment into the hotel sector increased significantly in the first quarter, reaching 26 percent of total volume, Geanakos said.