U.S. Apartment Sector Riding High in 2Q; Retail Gaining Ground

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"Sales of significant commercial properties totaled $57.4 billion in Q 2' 12, up over 10% from the prior quarter, but off 17% year-over-year, due to large scale M&A activity in Q2' 11," according to Real Capital Analytics' Mid-Year Review 2012, which looks at all property types. "Excluding (the M&A) transactions, Q2' 12 is up 6% year-over-year," which is still considered a slowdown, mostly attributable to the slowing of the macro economy during the period, according to the report.

For the first half of the year, sales across all property types totaled $108.8 billion involving 7,590 properties and both measures are very similar to the first half of 2011. While sales volume was up year-over-year 4%, the number of properties was down -1%.

The apartment sector is still riding high according to the RCA report. It had the most improvement in sales volume in the first half of 2012, year-over-year, with a total of $28.6 billion, which was 23% higher than the volume in the first half of 2011.

But retail is gaining steam, according to RCA. "Investment trends in the retail sector actually surpass those for apartments, if the entity deals (transactions in which properties are acquired with the purchase of another company, in which case there are normally multiple properties involved) occurring a year ago are excluded, giving retail a 49% year-over-year increase in volume and a 41% increase in the number of properties sold." Otherwise, retail sales volume, at $24.4 billion, was up only 5% from the first half of 2011 and the number of properties was down by 1%.

The apartment sector continues to out-perform other property types, according to RCA. Only development sites, that had the smallest volume, $4.9 billion, had a larger percentage of improvement, 67%, when compared to the first half of 2011. Further boosting the apartment sector's prospects, the demand for these sites is coming mainly from apartment developers.

But it was the office sector that had only a 7% improvement in sales volume in the first half of 2012, year-over-year, that had the highest volume, $29.2 billion. Plus, the first five of the top transactions for the first half of 2012, were for office properties. Perhaps surprisingly, the first three of them were not in New York.

The Bank of America building in Boston, which was sold in March for $615 million, had the highest price among the top transactions in the first half of this year. The 41-year-old building, with 1.3 million square feet, was sold to Boston Properties JV Wellington Management. The price per square foot, however, at $464, was not the highest.    

When it came to portfolio sales, it was retail that commanded the highest prices. In fact, four out of the top five portfolio sales were retail transactions. This list was topped by the Mills portfolio, which has nearly 23 million square feet and was sold for $3.9 billion, or $448 per square foot. The buyer was the Simon Property Group.