COVID Update: COMMERCIAL VS. LAND SALES

COVID Update: COMMERCIAL VS. LAND SALES

Commercial Sales Declined Across All Property Types in 2020 Q3

Sales transactions volume among REALTORS® fell on average by 3% year-over-year in the third quarter of 2020, a smaller rate of decline compared to the second quarter (-5%), according to members of the National Association of REALTORS® who responded to NAR’s 2020 Q3 Commercial Real Estate Quarterly Market Survey. NAR commercial members’ transactions are typically below $2.5 million (small commercial market). Sales transactions volume of properties or portfolios of at least $2.5 million (middle to large commercial market) plunged 57% year-over-year in the third quarter, also a smaller rate of decline compared to the second quarter (-68%), according to Real Capital Analytics. The heaviest decline was for acquisitions of retail malls (-7%), retail strip centers (-5%), retail free-standing (-4%), and office class A (-5%). Sales transactions declined the least for industrial flex (-1%) and apartments (-1%) an remained unchanged compared to a year ago for land and industrial warehouses.

Commercial Prices Decreased Except for Industrial Properties

Commercial prices of properties in the small commercial market space (less than $2.5 million) fell 2% year-over-year in 2020 Q3. Commercial property prices in the small commercial market where REALTORS® typically engage in were down across all commercial property types except for industrial warehouse properties where prices were up 1% year-overyear. The largest sales price decline was in hotel/hospitality (-7%), retail (-7%), and retail strip
center (-5%). Among transactions in the large commercial market ($2.5 million or more), commercial prices were essentially flat, according to Real Capital Analytics. Commercial properties held by REITS declined in 9% year-over-year, according to the Green Street Commercial Property Price Index.

Strong Increase in  Sales of Land for Recreational and Residential Use

In contrast to the sales decline among sales of commercial buildings, REALTORS® reported more land sales transactions in 2020 Q3 compared to one year ago, except for timber (-3%). The strongest growth was in sales of land for industrial use (4%), recreational use (5%), and developed residential land (6%). Prices rose at the strongest pace for developed residential land (8%) and land for recreational purposes (7%). With urban/city recreational activities (dining, movies, etc.) curtailed by the pandemic, people are spending their more leisure time in outdoor back-to-nature activities.

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Tammy Fadler