The real estate market kicked off the new year with a complex landscape, revealing both challenges and opportunities across various sectors, according to a Colliers’ analysis of MSCI data. January's data paints a picture of shifting dynamics, with some segments experiencing growth while others face headwinds.
The aggregate sales volume in January saw a 14% decline compared to the same period last year, primarily due to a significant 42% drop in portfolio and entity deals. However, this downturn was not uniform across all transaction types, as single-asset transactions managed a slight 1% increase. The market also witnessed fewer than 1,800 assets changing hands, matching the lowest monthly total of the previous year.
Despite the overall decline, certain sectors showed remarkable resilience and even growth. The office sector led the charge with an impressive 80% increase in volume, followed by hospitality at 26%, and multifamily at 9%.
The office market demonstrated a strong rebound, building on momentum from late last year. A standout transaction was AT&T's sale-leaseback of underutilized central office properties to Reign Capital for $850 million.
Major cities like Manhattan, San Diego, Los Angeles, and Morristown saw an uptick in $100 million+ transactions, indicating a thaw in market conditions. In Chicago, a notable deal involved the 1.6 million square foot property at 600 West Chicago Avenue, which sold for $54 per square foot.
While industrial volume experienced a 29% year-over-year decline in January, significant transactions still occurred. Norway's sovereign wealth fund, NBIM, acquired a 48-property portfolio from CPP Investment Board for $3.3 billion, spanning 14 million square feet. This large-scale deal could herald more to come, with EQT reportedly listing a multi-billion-dollar offering. In a notable single-asset transaction, Disney purchased a 407,000 square foot warehouse in Anaheim for $124 million, or $305 per square foot.
The multifamily sector continued its positive streak, marking eight consecutive months of year-over-year sales increases, albeit with a modest 9% gain in January. The month saw multiple smaller-scale portfolio transactions, including Harbor Group International's partial interest acquisition of an 11-property, 2,200-unit assemblage from The Garrett Companies and Telis Group for $630.5 million. Additionally, Palladius Capital Management purchased a 2,500-unit, 9-property student housing portfolio for $579 million.
Retail volume has been oscillating between gains and losses over the past six months. January saw a 59% decline from the previous year, which was not unexpected given that January 2024 had recorded the highest monthly volume in years. A significant transaction in this sector was UNIQLO's acquisition of its site at 666 Fifth Avenue in Manhattan for $352.5 million, or $20,382 per square foot. This continues a trend of retailers purchasing their storefronts, particularly in Manhattan.
The hospitality sector showed signs of recovery with a 26% increase in volume, marking two consecutive months of gains. However, the number of properties traded remained limited, with only 77 changing hands in January – the lowest total since the peak of the pandemic. A notable transaction was the acquisition of the PGA National Resort and Spa in Palm Beach Gardens, Florida, by a joint venture between Henderson Park, Salamander Hotels & Resorts, and South Street Partners for $422.5 million, or nearly $1.3 million per door.
As the market moves forward, Colliers say there are indications that portfolio deals may be poised for a comeback. This potential uptick in portfolio transactions could significantly boost overall volume in the coming months.