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Sales of small commercial properties notch record volume in 2015

As expected, 2015 was a record year for sales of smaller commercial properties, Boxwood Means reported.

Total sales of commercial and multifamily properties priced under $5 million were projected at $93.2 billion in 2015, which was up by nearly 14 percent compared to the prior peak in 2014. Sales were estimated to total $9.6 billion in December after averaging $8 billion each month through the year, the company said.

Boxwood Means Principal Randy Fuchs said record-low vacancies in some property types and a limited supply of new buildings are the driving factors that pushed sales up the past two years. Sales have risen from a low-water mark in 2009 of $36.9 billion.

“Core fundamentals are about as good as it can get,” Fuchs said. “You combine those solid operating metrics with attractive financing, all against a decent U.S. economic backdrop, good employment gains, and it doesn’t take rocket science to see why property sales hit a new record, and originations.”

Sales gains were broad-based; however, transactions fell off in some cities with significant energy-based economies. Fuchs said smaller markets are seeing a greater share of sales as the good deals in large metros become harder to find. 

"The secondary and tertiary markets are more stable now in terms of the market fundamentals and still offer some attractive yields, and it is a function of the local economies too," Fuchs said. "We are not talking about global capital going after a $5 million property. It is the local, small-market private investors in small-business real estate offices who have increasing confidence in the local economies."  

The average price of small-cap properties rose by just 4.5 percent in 2015, far less than the double-digit gains in the prices of large properties in major metros

Fuchs said sales of the smaller properties should continue to be strong through 2016.

“I don’t see any particular changes, structural changes, that will deter the market from continuing on a solid path in 2016, in terms of the small-cap world,” Fuchs sad. “Could we see some slowing in sales? Whenever we hit a peak, you wonder how much higher it can go.” 



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