How the Pandemic Changed Investor Buying Strategies
CoStar Data Shows Prices Have Risen for Smaller Industrial, Office and Multifamily Properties
A version of this article was originally published on CoStar News
Real estate consumers rerouted their investments in the first quarter, focusing on smaller properties but intermittently compensating more per square foot than pre-pandemic, according to CoStar’s data and industry pros.
CoStar data shows that investors are paying 7% to 9% more on average for industrial, office and multifamily properties when compared to this time last year. Pricing in two of the harder-hit sectors remains cheaper — more so for hospitality, where miffed sales have dominated, versus retail, which indicates advantageous from investment action in net-lease real estate.
“Demand for properties for sale is still very high, …prices have increased in the last year as interest rates are still very attractive with additional incentives [provided by the federal government].”
Almost every type of industrial building is trading across every risk profile, according to Abby Corbett, managing director and senior economist for CoStar Group. On average, the industrial properties acquired in the first quarter versus a year ago were about 11% smaller but averaged a 9.3% higher cost.
“We’re seeing everything from the cream of the crop Amazon-occupied properties trading for significant premiums to flex properties with value-add profiles being traded with plans to be reconfigured into last-mile distribution options in urban infill areas,” Corbett said.
Retail tenants have a quick influx of much-needed liquidity thanks to sale-leasebacks of industrial properties. This also offers investors an appealing acquisition prospect with long-term lease structures in place.
According to CoStar data, the average first-quarter deal size was 30% smaller in dollar value and 35% smaller in average building size for the office market; but the per-square-foot cost was 8.4% higher than a year ago.
Among the transaction activity, medical office properties have also gained a relative share. The need for satellite medical space continues to grow with population throughout various markets of the country. Therefore, the pliancy of these types of properties continue to attract investor attention.
For more information, or to read the full article with all data, visit CoStar for the original editorial.