European Commercial Property Deals Pass Covid-Ravaged U.S.

The value of commercial real estate deals in the U.S., long the most active market for transactions, fell behind Europe in the second quarter as the Covid-19 pandemic hit America harder, according to Real Capital Analytics.

Deals for U.S. commercial properties trailed European transactions by $19 billion in the second quarter, based on an analysis of transactions valued at $10 million or more. Preliminary figures for July indicate a continuing double-digit decline in U.S. volume from a year earlier.

“With a harsher public health situation in the U.S., investors face greater uncertainty around underwriting future income trends for a property,” Jim Costello, a Real Capital senior vice president, wrote. “The social safety nets of European countries can look more expensive, but in a time of crisis, they can also help investors understand how economic losses will be distributed.”

The U.S. leads the world in the number of coronavirus cases and deaths with infections continuing to add up faster than Europe, which has a larger population. While countries such as Italy and Spain suffered earlier outbreaks that were brought under control, Europe has faced a surge of new cases in the last few days.

U.S. commercial real estate deals routinely outpaced Europe since the Great Financial Crisis, according to Real Capital, with the exception of the fourth-quarter of 2017, when Blackstone Group Inc. sold warehouse firm Logicor to China Investment Corp. for $13.8 billion. A decline in the value of the dollar relative to the euro contributed to the European edge in the second quarter.

©2020 Bloomberg L.P.

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