RCA in the commercial property press:

Global Slide In Property Acquisition In The First Quarter Of 2009

Dubai Chronicle reports: The latest Global Capital Trends report of Real Capital Analytics presents the most comprehensive overview available of property sales activity in Q1. The current issue tracks the important trends that are reshaping commercial real estate investing across all countries and property types. From new trade routes to swiftly changing global capital flows, the report offers a complete picture of the trends affecting real estate capital today.

The global slide in property acquisition in Q1 2009 reached well beyond any adjustment for currency fluctuation. Worldwide sales volume and the number of trades plummeted to one-sixth their levels of two years ago and fell 73 % from Q1 2008 to just $47 b and 1,014 properties in Q1 2009, according the report. The broad drop in activity cut across all property types and just about every market.

Compounding the drop in transactions is an astounding rise in properties that need to be recapitalized.

New reports of defaulted mortgages and failed commercial property companies exceeded $55 b in Q1 2009, bringing the total universe of property assets currently known to be in distress to $153 b. A significant change in capital flows emerged in Q1 as the tide of cross-border activity turned and buyers were retreating to home countries and local markets to scout opportunities amid the distress.

Since the financial crisis toke the world by sotrm, real estate trading activity has achieved a stunning global uniformity: no matter the global zone, property type or even the prior trajectory of sales volume in a given zone, the patterns are very similar.

Acquisition volume around the world since September 2008 has tanked by roughly 70% or more.

Volume in the Americas has fallen hardest with Q1 2009 sales down 84% yoy and 56% from Q4 2008. Investors typically show strong preferences for property type when buying, but now are shunning all sectors with remarkable consistency, reinforcing the bluntness and breadth of the market retreat.

Few differences emerge at a more granular national level in Q1 2009 activity.
From major to minor markets, from mature to emerging economies, the yoy falloff in Q1 2009 was severe, led by Ireland’s 100% absence of sales.
Seventeen nations saw sales slip by 80% or more in Q1 2009 vs. Q1 2008.
But there were glimmers: Australia, now a value play, and the Czech Republic surprised with small gains in transactions.
France, viewed as a defensive play by some property buyers, recorded a decline in sales of 55%, a signifi cant drop, but one that is lower relative to most other European countries.

The UK, which has seen volume steadily decline for almost two years now, was one of the better performers with a fall in sales of 35%. This coupled with reports of an uptick in the number of bids properties are attracting could signal a rebound in UK market (though maybe not prices) ahead of other Western economies.
In addition to the significant price correction that has already occurred, currency fluctuations have made UK property look very cheap to Euro-denominated investors. The dearth of transactions globally not only makes property a very illiquid investment but also makes asset value very difficult to gauge. Price changes for recent sales vs. prior sales are far from
uniform, with some properties showing a gain but many others selling for 40% to 50% below prices of one or two years ago.

Cap rates, defying basic assumptions of relative risk across emerging and developed economies, also reflected the global unanimity of investor appetites and of lender capability. Cap rates in every global zone are up at least 75-100 bps over the past year.

Despite thin data, convergence is evident as yields on property acquisitions approach or exceed 7.0%.

About Global Capital Trends

Global Capital Trends is the only truly independent source for information and analysis on property acquisition activity worldwide. The proprietary data and analysis provide a comprehensive picture of markets, countries and continents, both wide-angle and deal by deal. From property type to investor breakdown to industry rankings of every kind, Global Capital Trends offers a winning information edge.

With six in-depth PDF issues per year and exclusive online content every month, Global Capital Trends includes a wealth of data. For more information, please visit their website: www.rcanalytics.com