Jun 16, 2009
By: Barbra Murray, Contributing Editor

As the recession continues to grip nations around the world, commercial real estate property transactions are still moving along at a snail's pace and, in general, without the premium price tags seen just two years ago. Global research and consulting firm Real Capital Analytics concludes in its most Global Capital Trends report that, while sales activity is likely to pick up soon, a full recovery is still a long way off.

Across the globe, the numbers remain grim, and no property sector presents an exception. From the second quarter of 2008 to the second quarter of 2009 to date, transaction volume plummeted 67 percent to just $48.6 billion. On a regional level, sales in the Americas declined 83 percent within the last 12 months, and 71 percent in EMEA, where the quarter-over-quarter decline was a dismal 24 percent.

But the news wasn't entirely bad. The quarter-over-quarter drop in sales in the Americas was a promising 6 percent, and worldwide, the decline from the first quarter to the second quarter was just 5 percent. These rather moderate drops in sales volume are sparking hope that the worst may very well be over--almost.

So where are the transactions taking place? Accounting for 29 percent of investment sales, emerging economies have left all others in the dust. Additionally, stabilization is at hand in Australia, China and Japan, and the majority of Eastern Europe, for the time being, is holding its own. And who's doing the buying? Deutschland. German-based buyers aren't making acquisitions at the level they did a couple of years ago, but they're behind a bulk of the activity at the moment. These investors are actively snapping up properties, but not just any properties; they're going after the premier assets, wherever they are. By the end of the first quarter, 30 percent of cross-border acquisitions could be attributed to German buyers. Recent mega-deals indicate that the trend may continue. Frankfurt-headquartered fund manager Deka Immobilien wrapped up the purchase of the nearly 580,000-square-foot Bentall V office tower in Vancouver, B.C., for $246.5 million last month, and Hamburg-based Union Investment Real Estate AG grabbed the 301,000-square-foot, year-old Galleria Auchan Monza retail center in Monza, Italy, for approximately $188 million in April.

While the worst may soon be over in terms of transaction volume, the pool of distressed properties is increasing at a rapid pace, especially in the retail sector, where distress has skyrocketed 254 percent since the second quarter of 2008, and with development activity far away on the back burner , distressed land and development sites have jumped 183 percent. But it's all relative. For the remaining property types, distress has risen in the 80 percent range. When looking at distress on a regional level, the numbers are growing at lightening speed in Eastern Europe and the U.K., while the remainder of Western Europe is experiencing a far more moderate pace. Regardless of the rate, the long-awaited arrival of bargain-basement sale prices for properties, burdened by outstanding debt and the like, is just beginning. And whenever a big sale is on, a glorious and rapid market resurrection is out of reach.

RCA concludes that, whether the bottom is at hand or just around the corner, recovery will more likely than not remain elusive for the long-term.

• 
• SAVE
• 
• PRINT
• 
• EMAIL
• 
• MOST POPULAR
• 
• RSS
• 
• REPRINTS
•