Digging Deeper on CRE Transaction Volume

Transaction volume is a good indicator of a market’s commercial real estate activity, but it may not completely capture pricing trends, said Situs RERC, Houston.

“It is important to keep in mind that total transaction volume is dependent on the number of properties transacted in a given metro [in addition to their prices],” Situs RERC said in its Staying on Track report, which studied fourth-quarter Real Capital Analytics transaction data.

The report said Los Angeles had the highest deal volume in the West last year and also the greatest total transaction volume across regions, but it credited that mainly to the large number of properties that traded in 2018, not to their average prices. The average price for a Los Angeles property that sold last year equaled just $15.5 million, mid-range among western metros, Situs RERC said.

“On the other hand, Chicago had the highest total transaction volume and the greatest number of properties transacted by far, but still garnered the highest dollar volume per property among the region’s metros [$18.9 million],” the report said.

Situs RERC analyzed transaction data across property types for 46 U.S. metros. It noted the data included outliers such as properties that fetched unusually small or large prices and portfolio purchases. “Nonetheless, the data provide a number of useful insights,” the report said, noting several very different markets had similar average dollar sales prices per property, including Charlotte, N.C. ($17.9 million), Philadelphia ($17. 5 million), Tampa, Fla. ($17.4 million), Inland Empire, Calif. ($17.3 million) and Fort Lauderdale, Fla. ($17. 1 million).

Other markets of varying sizes including Washington, D.C., San Jose, New York, Boston, San Francisco, Raleigh/Durham, N.C., Austin, Texas, Palm Beach, Fla. and Seattle ranked among the highest per-property volume across all regions, exceeding $20 million on average. Still others including Sacramento, Calif., Memphis, Tenn., Cleveland, Cincinnati, Indianapolis, Kansas City, St. Louis and Detroit had the lowest per-property volumes across regions, under $13 million.

Of all the regions, the Midwest has the highest percentage of metros with a relative (not absolute) high dollar volume per property transacted, the report said. Nearly 90 percent of Midwest metros had a relatively high dollar volume per property. Conversely, the eastern U.S. had the highest percentage of metros with relatively low dollar volume per property at 91 percent.