Pandemic Weighs on Investment Activity, With Lowest Q2 Investment Volume Since 2010

  • Q2 investment volume1 decreased by 69.9% year-over-year to $40.2 billion as both limited property touring and market uncertainty from the COVID-19 pandemic hampered investment activity. Excluding large portfolio and entity-level deals, single-asset volume decreased by 67.2% year-over-year.
  • The hotel sector had the largest percentage decrease year-over-year (-91.2%), while industrial had the least at -49.8%. Multifamily, which received the highest share of total investment, had the largest absolute decrease (-$34.1 billion).
  • Among major buyer types, investment by REITs/public companies decreased the most year-over-year in Q2 (-87.9%), followed by cross-border investors (-70.7%). REITs’ ratio of dispositions to acquisitions rose to 2.8-to-1 in Q2 from approximately 1-to-1 during the prior five quarters.
  • Cap rates were mostly stable in Q2 compared with the year-earlier period, though current rates are based on significantly fewer transactions and may be more reflective of the specific mix of assets trading than the overall market trend.
  • The total annual NCREIF return slowed significantly in Q2 to 2.7%, as the appreciation component declined for the first time since Q3 2010. Income returns were stable compared with recent quarters, suggesting that owners of institutional-grade properties have thus far been minimally impacted by negotiations with tenants over rent deferrals/abatement.

1All references to deal volume cited in this report are based on Real Capital Analytics transactional database, which includes entity-level and excludes development site transactions