Finance  ·  Industry

2020 Finance Activity Check With Reonomy

Reonomy’s Omar Eltorai takes the transaction activity temperature check since the pandemic


Market Activity

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Transaction activity for the first nine months of 2020 was sharply down compared to the same period in 2019. During the first three quarters of 2020, approximately 500 million square feet transacted across 5,157 deals, which represented a decline of 39 percent and 34 percent, respectively, over the same period in the prior year.

COVID-related declines in market activity were most severe in May and June, when the number of transactions being completed fell by 59 percent and 53 percent, respectively, compared to the same month in the prior year. 

Unsurprisingly, the hardest hit property type has been hospitality, which has seen a 77 percent decline in total dollar volume transacted between March and September in 2020 vs. the same period in 2019.

With such a sharp decline in market activity, price discovery has suffered. While many funds have raised funds for distressed opportunities, many of these expected deals have not hit the market yet. The transactions that continue to close are often performing assets – particularly multifamily and industrial. While private market valuations have been slower to react, public market REIT valuations have shown double-digit gains and losses across property types for the year, as a result of COVID.


• Balance Sheet Lending

Given the state of the economy and its fragile recovery, the majority of bank lenders continues to tighten lending standards for CRE. While the majority of banks has tightened standards for not only construction and development loans, but also loans backed by nonresidential property types.

Third quarter reporting across the major banks showed that credit quality of existing CRE loans remains relatively benign. However, many expect charge-offs to increase as government stimulus completely burns off – and many tenants and borrowers face continued business challenges. The number of CRE-securitized loans remains high, as these loans continue to hold the attention of loan officers.


New issuance in the CMBS markets has remained well below prior years. Since the pandemic hit in March, agency new issuance has been able to keep pace with the prior year, but private label new issuance all but stopped and has since remained approximately 40 percent below 2019 levels. However, pricing for new issuance has largely stabilized since the pandemic hit in March and is now mid to high single digits higher than pre-pandemic levels.

The percentage of loans in special servicing across the CMBS universe remains historically high, around 10 percent of all loans, or more than double the rate pre-pandemic. In the most recent months, the special servicing rate appears to have lost much of its upward momentum and appears to be plateauing.

Omar Eltorai is a Market Analyst at Reonomy.