Mismatched Expectations Weighing On Deal Flow

Ten-X

Buyers and sellers are seeing their perceptions of what commercial properties should cost diverging severely, according to an analysis by Ten-X Research.

This “expectations gap” has resulted in investor hesitancy and lower deal volume across the real estate industry. Furthermore, the analysis found a positive correlation between the size of the gap within individual CRE sectors and that segment’s decline in deal flow.

The gap identified by Ten-X is greatest in the apartment and hotel sectors, at 7.2 percent and 6.4 percent, respectively, which both saw deal volume drop. In contrast, office and industrial saw lower pricing gaps, at 1.7 percent and 4.1 percent, respectively, and both enjoyed a year-over-year increase in transaction volume.

While the retail sector is also experiencing a pricing gap in line with industrial at 4 percent, its deal volume dropped a whopping 11.3 percent. The unrelenting e-commerce headwinds continue to challenge the retail sector and account for this dramatic drop.