Have you been searching for a Greater Boston Commercial Real Estate Market Report? We’re going to cover Rockingham, Essex, and Middlesex counties for retail, office, industrial, and flex properties. The big theme of this update is about a 20-minute video, that is going to be what I call the pause, and I will explain that to you as we get into the data. The key thing to keep an eye on is the average price per square foot for the trades that have happened year to date, in contrast to prior years. Watch for that in the video. If you like the video, give us a thumbs up or feel free to comment. We look forward to your reactions.
This is the first quarter 2023 update, and we’re going to cover Rockingham, Essex, and Middlesex counties, looking at properties in the retail office and industrial classifications, valued between 1 million to 100 million dollars. These are properties that have sold year to date, January 1st through the end of the first quarter in 2023.
Volume-wise, coming out of COVID, the 2021 year, you’ll see that 828 transactions represented a high watermark. In fact, if you look at that number of sales in relationship to the trend, going back to 2006, you’ll see that 2021 and 2022 were both outliers in terms of the number of transactions that typically happen in this market area.
This year, in 2023, we’ve had 122 sales occur. If we project that out, and what we do is we trend it and can annualize it, we’re seeing that the annualized number is going to be about 474 transactions in 2023. That’s if everything stays constant going forward for the next three quarters. It’s possible this number could rise or fall depending on a number of factors, but right now, we’re projecting to end the year around 474 transactions.
We’re on trend to deliver about half the number of sales that we saw in 2021, and we are trending to the mean or average of the number of sales that occurred between 2006 and 2022 of 454 transactions per year, we’re actually going into a deceleration in the market that’s returning us to the long-term average for the typical number of sales transactions in a given year.
What this means is that we’ve essentially entered what I want to call the pause in the market, and the pause originally started back in May, June of 2022 when contract originations started to decline, and we started to see fewer transactions occurring. Those numbers showed up in the October 2022 numbers, November, December, January. Now, we’re into January and February.
What I mean by the pause is that we’ve seen a separation in the sales data in the sense that high quality, high-value properties, for the most part, there are a few aberrations, a few outliers, but for the most part have departed the market and are not being traded. What we’re actually seeing traded right now are deals that may have been lingering. There may be some opportunity, deep value-add pricing with these deals. When I get to the average pricing per square foot, you’re going to see this data show up.
Transaction velocity-wise, what we’re seeing here is this deceleration coming out of ’21 and ’22 where we saw a sharp increase in transactions in ’21. In fact, that was a 44% positive change. That started to slow down a little bit in 2022. We dropped about 104 transactions from ’21 to ’22, mainly due to the Federal Reserve raising interest rates and investors starting to pull back out of the market to wait to see how far those interest rates were going to run. That’s continued into 2023, where we’re seeing an ongoing deceleration in sales volume. The volume or number of trades year over year is down about a third. Down about 33%.
Just to benchmark us in the 10-year treasury world, the 10-year treasury year to date is averaging about 3.45, 3.5 percent, right around there. We saw the largest run-up in the 10-year treasury in 2022, but we’re now seeing a deceleration in the federal interest rate increases and in the 10-year treasury pricing….
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INDEX TIME STAMP:
Market Overview 0.01-14:01
Retail: 14:01
Industrial 16:23
Office: 17:09