Alternative sectors see decline in Q2

Some other sources such as: Goldman Sachs AND CoStar also say there is evidence of a bottom approaching, if not quite there. These are broad views across large markets, with an acknowledgment that some areas, such as offices, are complex, with the top 10% to 15% doing well in Class A, and the rest in Class B and C taking most of the hits.

But the office market is not alone. While not at the same level of pain, MSCI also said alternative sectors are not showing a bottom. Investment volume in alternative real estate types in the second quarter was $8.6 billion, down 12% year over year. Sales activity, compared to the average second quarter between 2015 and 2019, was down 34%. All asset types were at or below average levels.

The biggest winner of the quarter was cold storage, which grew 44% year over year. There was $0.3 billion in individual assets and $0.2 billion in portfolio, for a total of $0.5 billion in sales.

Mobile and prefabricated homes came next, up 34% year-on-year, with single-asset transactions worth $0.5 billion.

Self-storage sales increased 4% year-over-year, with single-asset sales of $0.6 billion and portfolio value of $0.8 billion.

Now comes the loss of a portfolio of $0.3 billion of age-restricted assets and a single asset of $0.1 billion, for a total of $0.4 billion, down 2% from a year earlier.

Student accommodation prices fell 5% year-on-year, with single-asset property values at $1.6 billion and portfolio values at $0.1 billion.

In the healthcare sector, single-asset transactions totaled $1.3 billion and portfolio transactions $0.9 billion, for a total of $2.2 billion, down 7% year-on-year.

Research and development expenses declined significantly by 29%, including sales of $1.2 billion for single assets and $0.3 billion for portfolio.

Finally, the $0.3 billion data center, spanning single assets and a zero portfolio, represents a 66% drop, which is a huge amount for an asset.

MSCI found that individual assets often outperform portfolio or entity-level deals because underwriting for the former is more focused. The overall portfolio can have implications for stronger and weaker properties that can affect individual properties.

Individual properties totaled $6.4 billion, down 20% year over year. “Such sales accounted for 74% of alternative volume in Q2, above the average Q2 share since 2017 of 66%,” they wrote.

Portfolio and entity-level transactions were actually up 27% year-on-year. However, portfolio transactions in Q2 2023 were the lowest for that period in over a decade, so the increase exceeded a low threshold.