CRE Sales and Leasing Transactions Increasing – IPG Investigates Why

Author Lisa Stern Read bio
Date: January 10, 2022

Our team of office and industrial agents, found in its recent quarterly survey that sales and leasing activity is picking up significantly.

The top-level prognosis for office and industrial properties is – as expected – that industrial assets will outperform office properties. However, some of the survey metrics have reached all-time highs.

The key factor in determining how the industry is doing comes down to the number of transactions that are moving forward.

This report has the intention to reveal that despite the Delta variant surge, supply chain issues at the ports, and rising inflation, the office market continues its recovery and industrial momentum shows no end.

Transactions Are No Longer on Hold

The status of sales and leasing transactions continues to improve, reporting that 82% of deals they are working on are moving ahead as of the third quarter of 2021, a 4% increase over the previous quarter, and a significant 74% improvement over the third quarter of 2020.

Conversely, the percentage of transactions placed on hold or canceled both dropped to their lowest reported figures since the start of the pandemic.

Recovery in transaction flow can be largely attributed to the industrial sector, while the office sector, on the other hand, saw a dip in on-schedule and on-hold transactions this past quarter.

Industrial transaction activity is currently moving swiftly. Owners want to move transactions along, but new regulations might make them more costly. It’s important to note that there is a shortage of inventory (and) regulations for building a new project make it tough for numbers to pencil out.

Leasing Activity Increasing

We cannot act as if we don’t see the increase in leasing activity as well. Its activity rose between the second and third quarters by 72%, which is almost double that what we saw in a rise between the first and second quarters. 

This improvement was fueled largely by leases signed for industrial space, rather than office space.

Also, finished space, available for immediate occupancy, is in high demand. Spaces that are move-in ready are leasing. Tenants have delayed decisions such that when they do have a need it’s nearly immediate.

The office sector has gone through a reassessment of its fundamental role over the past 2 years, leaving most office occupiers in a status quo situation. 

Although one potential exit is moving towards flexibility, potential investors will be wanting to assess the combination of location, occupier sector and covenant in order to consider a purchase.

Logistics leads

In terms of sector breakdowns, logistics popularity continues to gain momentum off the back of rising e-commerce.

With limited products on the market, strong competition will naturally drive down yields. With a strategic footprint, omnichannel improvement, and the integration of automation processes to consider, many e-commerce operators are having to inject large investment volumes to maintain market share.

What to Expect in 2022

To obtain an overall outlook for the market, we need to hope and believe that conditions in our local markets will change in the coming quarter.

The outlook relating to the industrial sector indicates market conditions to support leasing and sales activity, improving them by 1% to 5% over conditions in the third quarter of 2022.

The outlook for the office sector is certainly lower. The conditions in the fourth quarter of 2023 are expected to remain similar to those in the previous year. 

Landlords are agreeing to shorter-term deals at premium rents and are aggressively pursuing longer-term tenants with generous concessions.

In terms of other sectors, retail transactions were largely confined to supermarket and hypermarket retailers with the grocery sector proving its resilience during country lockdowns. 

Such resilience has caught investors’ attention-seeking to maintain their retail exposure resulting in the compression of supermarket yields.