Commercial Property Sales Fall to One-Quarter of Prevailing Six-Year Average
Bloomberg - Businessweek reports: According to Real Capital Analytics, the volume of commercial property sales for the first six months of 2010 totaled $34.2 billion. This represented 26 percent of the average first-half total for the past six years (since 2004), and just 12 percent of 2007’s first-half total. Compared to the inertia of 2009, however, this year’s $34.2 billion was 58 percent higher than the total volume for the same period last year.
Contrary to intuition, the slow recovery in commercial sales is not due to a lack of capital or demand on part of investors. In particular, private equity funds and REITs amassed large pools of equity over the second half of 2009 in preparation for foreclosure fire sales that were predicted to come en masse in 2010. Real Capital’s Global Chief Economist, Dr. Sam Chandan, provided the following explanation for the disconnect between capital, demand, and the slow pace of commercial sales: “…owners who owe more than their properties are worth are instead finding new sources of equity and lenders are willing to restructure their loans…In less attractive markets, banks have been extending loans, waiting for higher prices so they don’t record losses.”
He also added that distressed assets have played a much smaller role in recent sales than was originally forecast during the darkest hours of 2009. However, sales are not down uniformly. Using specific property transactions from the first half of 2010, Dr. Chandan pointed out which of the US markets are actually seeing acceleration in sales and stability in asset pricing.
View the full article on Bloomberg - Businessweek: Commercial Property Sales Fall to One-Quarter of Prevailing Six-Year Average
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Posted by: Nina Turner