RCA in the commercial property press:

Demand For Office Space Drops

The Houston Chronicle reports: A continued lack of financing and uncertainty in the economy caused demand for Houston-area office buildings to plunge in the first quarter.

Sales volume fell 88 percent, with $42 million worth of properties trading hands, compared with $347 million a year ago.

Prices fell almost as much.

The average price per square foot paid for office space in the quarter fell to $56, according to a report from LoopNet, an online commercial real estate listing service, in conjunction with Real Capital Analytics.

But because volume in the quarter was so low — there were just five office transactions — it’s hard to rely on any statistical pricing information, said Thomas Fish, vice chairman of CBRE/Melody Capital Markets.

“There’s a much smaller universe of trades happening,” he said.

The LoopNet report also showed big declines in quarterly sales and prices for retail, industrial and multifamily properties from year-earlier levels. Its data is based on property sales of at least $2.5 million.

Commercial property investors, brokers and owners expect prices to fall further. But many anticipate the beginnings of a recovery next year, according to a national poll released last week by LoopNet.

Two-thirds of the respondents said they expect price declines of 10 percent or more will be required to restart the market.

Transaction volume in Houston is clearly at a low.

When it does pick up, said Fish, it will be because lenders are no longer willing to extend terms on borrowers in distress who will be forced to sell.

“If you don’t force the issue, then it won’t happen,” he said.