Coldwell Banker Commercial Benchmark

Commercial real estate sales poised to hit $49B in 2009
Silicon Valley / San Jose Business Journal - by Katherine Conrad

Real Capital Analytics predicts sales volume for all commercial real estate sectors will hit $49 billion in 2009, less than half the amount sold in 2008 and significantly less than the $80 billion sold in 2001.
In Silicon Valley, 26 properties have been sold so far in 2009, for a total of $730.9 million. During the same time in 2008, 110 properties had changed hands for a total of $2.7 billion. The high-water mark for the valley was 2007, when $7.86 billion worth of commercial real estate was sold.
In the 2009 breakdown for the South Bay, the office sector had the highest volume out of apartments, industrial property, offices and retail. So far, five office buildings sold for a total of $226 million: Nine industrial properties sold for $138.7 million, six apartment complexes sold for a total of $223.7 million and six retail centers sold for a total of $142.3 million.
The New York firm said in the report released Tuesday that the 2009 total represents a “modestly improving investment picture,” as investors tiptoe back into the market.
“Investment activity is much improved from earlier in the year, but no quick rebound is underway,” said the report.
And, in a surprising twist, Real Capital reports that less than 10 percent of the properties sold this year have been considered “distressed.”
Buyers are interested, but the bid-ask gap remains wide. Sellers who are “realistic and motivated” to list at current market prices remain rare, according to the firm.
Multiple bids on some properties illustrate that “not all current sellers are troubled or need to raise cash to avert distress, however, no one is selling unless there is a compelling reason. Every investor group has reduced sales significantly and generally would much rather hold than sell at a low price.”
While noting that the credit crunch is in its third year, and has shown few signs of easing, Real Capital listed 440 lenders across the world that are lending -- albeit with far more conservative terms.
The five serving South Bay customers include Pinnacle Bank in Morgan Hill, Stanford Federal Credit Union in Palo Alto, Provident Credit Union in Redwood City, and Lighthouse Bank and Santa Cruz County Bank, both in Santa Cruz.
While October’s investment sales climbed slightly above September’s level, the firm expects November’s sales to dip. But December sales should make up for the drop as buyers and sellers rush to close escrow on property before the year’s end.
Among the sectors, office is seeing the most activity, at 31 percent of the market, followed by apartments and then retail. At 5 percent of the market, hotels barely register.
Apartment and office sales are expected to each hit more than $14 billion in volume in 2009; retail is expected to reach $10 billion and hotels bring up the rear with $2.4 billion in sales. The firm predicted industrial sales, which hit $7.2 billion in 2009, could increase dramatically in 2010.
Katherine Conrad can be reached at 408.299.1820 or kconrad@bizjournals.com.