Commercial Property Transactions Slow

Esther Fung reported yesterday at The Wall Street Journal Online that, “Big U.S. real-estate companies have been selling assets at a slower pace this year, as the gap widens between their views on what their properties are worth and buyers’ willingness to pay high prices.

After an eight-year bull run for commercial real estate, some investors have been anticipating a correction. But that hasn’t happened yet, and there is little consensus on how much longer the bull market has to run.

Buyers, facing tighter lending conditions and slower income growth, are expecting lower prices and bidding accordingly, but sellers, including publicly traded property owners, are holding out for better deals.”

The Journal article stated that, “Listed real-estate investment trusts have sold $46.7 billion in assets as of Oct. 23 this year compared with $71 billion in assets sold in all of 2016, according to data from Real Capital Analytics. Acquisitions, on the other hand, have been at a roughly similar pace at around $44.6 billion as of Oct. 23 this year compared with $47.9 billion in 2016. There have been fewer major transactions especially in the office and retail real-estate sector.”

“Commercial Property Transactions Dry Up as Sellers Hold Out for Better Prices.” The Wall Street Journal Online (October 24, 2017).

Ms. Fung also noted that, “Strong growth in property rents in recent years has fueled deal making, as owners met their targeted yields earlier than expected and buyers were bullish on further appreciation. This year, by contrast, rent growth apart from the industrial sector has been subdued or flat, said Brian McAuliffe, president of institutional properties at real-estate consultancy firm CBRE Group.

Unlike previous cycles, property owners aren’t overly leveraged and are still able to access the debt markets rather than be compelled to sell at unattractive prices.”

Yesterday’s article added that, “A dearth in transactions of top-tier malls this year has made it difficult for analysts and investors to make more accurate calls about market conditions.”

This entry was posted in Real Estate Law. Bookmark the permalink. Both comments and trackbacks are currently closed.