2016 Commercial Real Estate Review

By January 19, 2017 No Comments

As we enter a new year, it’s important to take a step back and reflect on what 2016 brought the world of commercial real estate. There were several trends that experts predicted and indeed held true as the year went on.

According to Real Capital Analytics, foreign purchases of U.S. real estate totaled over $62 billion in 2015, and we saw this trend continue into 2016. Over past years, the U.S. real estate market has been seen as a sort of safe haven for international investors due to its stability and transparency. In particular, China overtook Canada in 2016 to become the largest cross-border investor in U.S. assets. For example, one of the top commercial real estate sales from the year came from Chinese investor HNA EcoTech Group in August. They purchased 123 Mission Street in San Francisco, an office tower that houses tenants like Salesforce, New Relic, and Marin Software, for $255 million.

Another continued trend that 2016 saw was the focus on retail within the commercial real estate market. As online spending continued to outpace in-store spending, vendors were on the hunt for space that would give their consumers a more balanced experience. Another top 2016 commercial real estate sale took place in Westwood, California, where American Realty Advisors acquired the shops at University Station for $206 million. This 2.1 million-square foot complex features apartments and offices alongside a 400,000-square foot retail center.

2016 was not all sales and celebration for commercial real estate, however. There was such an elevated pace of business in 2015 that it only makes sense we would see transactions slow the following year. Commercial property transactions fell 6% YOY in November, following a 35% YOY decline in October. In addition, there weren’t nearly as many “mega-deals” in 2016 as there were in 2015 which totaled $61.8b in Q4’15.

Still, with the downfall in sales that we saw in Q4’16, experts are hopeful that this will mean a moderate rise as we enter 2017. The transition into a new year typically yields positive results for commercial real estate. Even though much of the world had a somewhat negative outlook on 2016 (to put it lightly), commercial real estate, particularly in California, fared well enough amongst the madness.