2019 sales volumes largest on record, but the total dollar value masks an underlying quietness in the market as the number of transactions is ~30% down on the five-year average. Total sales volumes are currently ~$38.6 billion, surpassing the ~$37.8 billion recorded in 2018, making 2019 the strongest year on record. We understand there are still a handful of deals in the works, therefore likely that 2019 will hit $40 billion by year-end.
Following are the key takeaways of 2019 for capital markets:
- The number of transactions came in at ~670, which is markedly down on the five-year average of 983. This result indicates that owners have been reluctant to divest assets as they are keenly aware that they will struggle to redeploy capital.
- Office was the only sector to surpass previous levels, coming in at ~$23 billion – significantly above the $17.8 billion recorded in 2018 – making 2019 the highest year on record. Yet, the number of transactions was down ~10% on 2018 indicating that it’s the big-ticket items which have sold. This is further evidenced by an average sale price of ~$104 million compared to the five-year average of ~$62 million.
- Retail sales volumes came in at ~$7.2 billion which is down ~27% on 2018, with the number of transactions down ~37%. The dollar value belies the weakness in the sector as three transactions accounted for 27% of total volumes. Despite this weakness, astute investors appear to be taking advantage of owners repositioning portfolios and picking up high-quality assets that rarely come to market.
- Industrial has had a strong final quarter, and with more deals set to close in the final two weeks of the year, we expect volumes to come close to the record levels seen in 2018. As it stands ~$6.9 billion worth of assets exchanged across 241 deals compared to 2018 levels of ~$8 billion across 415 transactions. Investors remain keen to get into the sector widely seen as the place to be over the last few years.
- Hotels bucked the trend and recorded an increase of 20% in the number of transactions, but this was unable to translate into an increase in dollar value which declined ~18%. Partially explaining this is the lack of CBD stock for sale in the major markets which has been an ongoing trend.
The overall theme for 2019 was a significant weight of capital trying to find a home in very few assets resulting in increased prices. With two further interest rate cuts in 2020 expected, leading to even cheaper cost of capital, we can expect to see increased competition levels for any assets coming to market.