2021 CRE investment hit a record $746B

CBRE released its 2021 US commercial real estate investment volume and announced a record $746 billion, up by 86% from 2020. The fourth quarter of 2021 also saw a record $296 billion, increasing 90% year over year.

For a pre-pandemic comparison, volume in 2019 was $542.4 billion, down 1.8%, and Q4 that year was $152.7 billion, down 8.1% year over year.

There’s been a lot of evidence throughout 2021 that the annual tally would be spectacular, with pandemic rebounds, volumes of cash sloshing over the sides of bank accounts as they looked to be invested, and concerns about inflation and the need for hedging. But it’s good to remember that these factors also drove up prices and that the actual deal volume could be different.

Multifamily was the hot sector in 2021 at $136 billion for the fourth quarter and $315 billion for the year, giving it a 45.9% share of the quarter and 42.2% of the year.

For the whole of 2021 across all types of investment, industrial had a 21.5% share; office, 18.3%; 9.9% for retail; and hotel at 5.7%. 

By market, greater Los Angeles was at the top. Investment volume there was $58 billion, with New York coming in second at $49 billion and the $41 billion in Dallas coming in third. The fastest growth was in Las Vegas, where $9.7 billion was a 231.8% year-over-year increase. Houston saw 190.5% growth overall at $25.8 billion, while South Florida’s $27.9 billion was a 178.6% jump.

Multifamily saw the fastest growth in Las Vegas, with a 394.3% year-over-year jump. Next was Houston at 379.0% and South Florida’s 240.3%.

In office investment, the top three regions for growth were Austin (410.4%), Richmond (359.5%), and South Florida (277.7%).

Growth rates in industrial were lower, which may owe to the massive rush to build and spend in 2020 during the pandemic, raising the question for investors of whether growth could continue to lag, or if it might be a case of prices topping out to some degree. Top three regions: St. Louis (144.9%), Sacramento (143.8%), and Austin (142.5%).

Year-over-year retail investment was generally higher than industrial, with Seattle seeing 248.8%, Phoenix at 217.8%, and Houston, 210.6%

Volumes of hotel investment were overall lower, but the growth was remarkably higher in Seattle (1612.0%), Tampa (1284.8%), and Florida’s panhandle (1181.3%).

Big sources for cross-border investment were Canada’s $20.9 billion and $15.2 billion from Singapore. The two countries were far and away the biggest sources.

Final quarter numbers on cap rates show that the “everything is driving lower and lower” discussion might be over reactive. Even warehouse industrial saw cap rates of 5.47, not the “threes” many suggest as averages. Multifamily caps were lower, but still in the high fours. The highest: hotels and an average 8.33.