Each quarter, the commercial real estate institution CBRE releases its U.S. Capital Markets Figures report, which analyzes where capital was invested.
So, who’s investing in what? Here are my top 9 takeaways from CBRE’s Q1 2021 capital market report:
1. YoY total investment volume is down 27.6%.
The total investment volume was $92.4 billion, which does represent a reduction. However, a strong recovery is expected in the second half of 2021.
2. Multifamily and industrial represent over 50% of investment volume.
38.5% of capital was invested in multifamily and 22.2% was invested in industrial.
3. Investment volume fell by 38% in the nation’s top 20 markets.
Topping the list were Greater New York (-49.8%), San Francisco Bay area (-46.6%), Greater Washington DC (-49.6%), Seattle (-50.5%), Chicago (-45.1%), and Houston (-56.9%). Markets in the top 20 that were more resilient include Boston (-17.0%), Phoenix (-27.8%) and Raleigh/Durham (-25.6%).
4. Some markets experienced a large increase in investment volume of certain asset types.
Office investment increased by 347.6% in Richmond and by 23.5% in Raleigh/Durham. Industrial investment increased by 30.7% in Boston. Multifamily investment increased by 63.7% in Indianapolis, by 17.2% in Jacksonville, and by 13.0% in Charlotte. Hotel investment increased by 161.0% in Modesto, by 90.9% in Hawaii, and by 43.0% in Austin.
5. Private investors accounted for over 50% of investment volume.
This represents a 9% increase compared to a year ago. Market share also grew for institutional investors (22.8% in Q1 2020 to 26.3% in Q1 2021) and foreign investors (6.3% in Q1 2020 to 7.6% in Q1 2021). Conversely, REITs experienced a 75% YoY decline in investment volume.
6. Industrial and multifamily cap rates continue to fall while office, retail, and hotel cap rates had a negligible increase in Q1.
Multifamily cap rates fell by 21 bps to 5.0% and industrial cap rates fell by 20 bps to 6.03%.
7. Returns are below the last cyclical average (2010 to 2019).
The annualized NCREIF total return increased from 1.6% in Q1 2020 to 2.6% in Q1 of 2021 but is still below the average NCREIF for Q1 2010 to Q1 2019 of 10.2%.
8. YoY mortgage production increased for all lender types except CMBS and life insurance companies.
Fannie Mae (51.4%), Freddie Mac (40.4%), and HUD (56.6%) experienced large increases.
9. Delinquency rates higher for all lender types.
However, all delinquency rates remained low compared to last cycle.
Click here to download CBRE’s full report.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.