The overall commercial real estate market has been a major casualty of the recession with values falling as much as 30+% from their peak, and sales down 83% from a year ago (113 Billiion to 9 Billion Nationwide).
The Good News? There is evidence of increased activity by commercial property buyers and commercial property sellers.
The gap between US commercial property buyers and property sellers is narrowing, indicating the shattered market is closer to beginning a path to recovery.
The last couple of weeks have seen a slight improvement in transactions. Credible buyers are appearing and bidding on assets. Previous Property Investors who were showing up to bid weren’t credible and were often unable to close their financing. Current Investors fall into the institutional category and are well capitalized to close large Commercial Real Estate transactions.
But prices are not improving and values have fallen over 30% from their peak prices reached in 2007.
Other sellers also are getting closer but have not yet embraced the new price reality and sales are being discussed but not done at a level that can clearly indicate market prices. Investors understand that’s where the market is headed and yet transaction additivity remains extraordinarily low.
Commercial real estate sales worldwide in the second quarter are expected to be down some 67% from a year earlier, with US volume suffering more, down 83%.
The correction in the commercial real estate market, is going to be painful for a lot of people, particularly those who bought their commercial properties using considerable amounts of debt financing.
