Go Ahead, Sweat the Small Stuff
CBRE reigned as the top commercial property broker in Real Estate Alert’s inaugural rankings of deals valued below $25 million, an analysis based on more than 8,000 vetted, verified transactions. What may raise a few eyebrows is that the total value of smaller deals fell just 23% in 2020, much less than the 33% decline experienced by larger deals during a year dominated by the Covid-19 pandemic.
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Inherent differences between the two markets are a key factor driving these trends.
“The sub-$25 million buying pool is dominated by high-net worth individuals and family offices. The person who runs the shop is usually the same one making the decisions,” said Richard Quinn, Managing Editor of Real Estate Alert. “The bigger players need more time to pull the trigger; they have investment and risk committees. Smaller investors were able to buy into bigger deals because the bigger players were no longer at the table.”
The private capital marketplace for smaller commercial real estate deals is heavily populated with individuals seeking to take advantage of Section 1031 of the Internal Revenue Code, which allows investors to defer capital gains on the sale of a property by reinvesting the proceeds in a similar property within 180 days. In 2020, there was a growing fear that an incoming Biden administration would eliminate the tax break, motivating some to buy sooner than they had planned.
“If someone had an exchange, they were likely to push it through in 2020 if they could, or will do so in 2021 with the looming political risk in the exchange market,” Kevin MacKenzie, an executive managing director of capital markets at JLL, told Real Estate Alert. “That is helping support deal velocity.”
Carlo Barel di Sant’Albano, Cushman’s chief executive of global capital markets and investor services, told Real Estate Alert that in March and April, as the impact of the pandemic accelerated, institutions immediately moved to triage existing portfolios and protect their assets. Private-capital buyers took the opportunity to step up. “What was interesting was that as [institutions] pulled away, the private companies and high-net-worth individuals were there,” di Sant’Albano said. “They were there for those deals that were left. They finally could have a seat at the table, because usually running against the big players is very hard. They could make the decision very quickly, and they had plenty of capital.”
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The Special Supplement marks just the first formal collaboration between Green Street’s News and Real Estate Analytics teams with more combined insights to come. The information-gathering effort will pay off for Green Street clients thanks to a wealth of valuable, proprietary transaction data. The benefit for Real Estate Analytics customers is in that data: an addition of 8,000+ verified transaction comps for $5 million to $25 million deals that make Green Street’s Atlas interactive mapping platform an even more powerful tool.
“The expansion of the deal database and creation of a new set of broker rankings grew naturally out of Green Street’s acquisition of Real Estate Alert last year,” said T.J. Foderaro, Editor in Chief. “In addition to 20-plus years of transactions over $25 million, the Deal Database now encompasses $85 billion of deals valued at $5 million to $25 million, allowing us to provide the private-capital market with the same high-quality data and insights we’ve long delivered to the institutional space.”
“This is a quantum leap forward,” said Andy McCulloch, Green Street’s Global Head of Data & Analytics.
Atlas now boasts more than 50,000 transaction comps, valued at more than $3 trillion. Coming soon: even more enhancements to Green Street’s unparalleled platform of commercial real estate news, data, analytics, and research.
Subscribe now to Real Estate Alert to access exclusive news and data not available elsewhere, providing you with a competitive edge through an early look at opportunities, risks, and behind-the-scenes dealings in the real estate space.
- Download the full 25-page Real Estate Alert Special Supplement on sub-$25M deals.
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