With Few Sales Closing, Property Listings Pile Up

With Few Sales Closing, Property Listings Pile Up
May 20, 2009 - CRE News
While buyers remain unwilling or unable to make purchases, the inventories of property offerings and distressed assets are mounting substantially, according to Real Capital Analytics.

The disparity hit a high note in April, when the volumes of properties made available for sale far exceeded the sale of all major property types. A total of $2 billion of properties in the four major sectors changed hands during the month. But $11.5 billion of properties were offered for sale.

Meanwhile, the volume of commercial property assets that the New York research firm considers distressed increased by $19 billion - the largest monthly increase ever for assets reported to be in default, foreclosure or involved in a bankruptcy.

Not surprisingly, retail properties proved most difficult to sell, with only $460 million of those assets changing hands. But $4.2 billion worth of those properties were being offered for sale during the month. From January through April, its totals are $2.4 billion in sales versus $10.9 billion in new offerings.

The sector is also the market leader in distressed assets, with $12.7 billion added to the category last month, increasing the sector's full-year volume of newly-distressed properties to $16.8 billion. The lion's share of last month's additions resulted from the bankruptcy filing of General Growth Properties, the Chicago REIT that owns interests in more than 200 shopping malls.

Owners of industrial properties placed $2.1 billion of their assets on the sales block last month, but were able to sell only $266 million.

The office sector stood out in April for the severity of its sales-volume downturn with $387 million of closed sales versus a $1 billion monthly average in the three preceding months. For the four months ended April 30, the sector has seen $4.4 billion of closed sales versus $12 billion of new offerings.

Multifamily is the only sector that showed any glimmer of improvement in April, when it posted $900 million in closed sales, its highest monthly total this year. The volume of new offerings dropped slightly to $1.8 billion. The 2:1 ratio for offerings versus sales in April compares to the sector's 3:1 ratio for the latest four-month period.

Real Capital said that multifamily's narrowed gap in offerings versus sales may be a sign that "sellers are stepping back" from the market. At the same time, sales in the sector have been greased by the still-available debt capital from Fannie Mae and Freddie Mac. In fact, such agency financing was used to finance the bulk of the multifamily sales made by Northwestern Mutual Life Insurance, which included a combined 1,368 units in Southern California that were sold in three deals worth a combined $201.3 million. Those deals accounted for nearly a quarter of the month's transaction volume.

Real Capital also noted that multifamily may be preceding the other sectors in a recovery because it was the first sector to turn after peaking in the first quarter of 2006, when the housing market began to tumble.



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