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Small-cap CRE market slows

The market for small commercial properties is showing signs of slowing down, according to Boxwood Means.

Sales of properties priced under $5 million dropped 9.7 percent year over year in April to a preliminary estimate of $6.9 billion, the company said.

boxwood pic

Sales also were cooling off in more markets around the country. Of the 122 metro areas tracked by Boxwood means, just 55 of them had year-over-year gains in sales volume in April, which was down from 66 markets in March and 99 of the metros in April 2015. Asset prices on a national basis also have been largely flat, up just 30 basis points year to date as of April.

April's numbers followed a choppy first quarter overall on the sales front. Through the first fourth months of 2016, however, sales totaled $29.5 billion, which is 1.6 percent ahead of the strong 2015 pace for the same period.

Randy Fuchs, Boxwood Means principal, said the general pullback in April was concerning; however, property fundamentals remain strong.

“Looking forward, my guess is that sales will be choppy, not straight up or down, but likely in the aggregate still to produce a solid year in total property sales,” Fuchs told Scotsman Guide News. Fuchs also predicted that prices would appreciate in the 3 to 5 percent range, and faster in some markets in Florida, California and Colorado. 

The picture for small-cap loan originations, which includes refinancing, has been brighter, according to Boxwood Means. In the first quarter, loan volume totaled $41.5 billion, which was 3.1 percent ahead of 2015’s record pace. The report also noted that private lenders are taking a greater share of lending, accounting for a 2 percent of the volume, the highest market share since 2005.

Some major commercial lenders have pulled back because of regulations that place higher capital standards to mitigate risk, however. 


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