Commercial real estate sales plunge (70%+ QoQ)

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Friday, April 17, 2009, 2:06pm PDT

Commercial real estate sales plungeSilicon Valley / San Jose Business Journal - by Katherine Conrad
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Commercial real estate sales plummeted across the globe with transactions dropping in the first quarter more than 70 percent from the end of 2008, according to a report released this week by Real Capital Analytics.

The New York-based firm said sales in the first three months of 2009 were just one-sixth of the number of buildings that traded two years ago. All told just over 1,000 buildings valued at $47 billion were sold in the first quarter of 2009.


Another worrisome sign is the rise in the number of distressed properties. Real Capital reported that another $55 billion worth of assets fell into default on their mortgages during the first quarter, bringing the total value of assets known to be in distress to “a stunning $153 billion,” an jump of 56 percent over the fourth quarter of 2008.

Of the properties across the globe that are in trouble, 85 percent are located in the United States, Japan, Spain, the United Kingdom and Australia. Real Capital noted a trend emerging in which lenders are extending the loans rather than forcing payment, calling it “kicking the can down the street.”

By the end of March, $36 billion worth of debt had been restructured.

“Instead of taking significant losses now, the preferable strategy for many lenders has been to simply extend or modify loan terms and hope market conditions improve over the next year,” the report said.

But those assets are still considered “distressed,” Real Capital said, and will still need to be handled.

Almost half of the properties in trouble are not derelict buildings, but rather well-performing properties that are worth less than what their current owners paid for them.

The report noted that no sector – not office, warehouse, hotels, apartments, retail – is immune from the downturn, and neither is any region of the world.

And nowhere has the volume of transactions fallen more than in North and South America, where deals are off in the first quarter by 84 percent compared to the first quarter of 2008. The rest of the world, however, with the exception of Australia and the Czech Republic, is in the same boat.



Katherine Conrad can be reached at 408.299.1820 or kconrad@bizjournals.com.

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