Friday, May 22, 2009

New “LoopNet Pulse Poll” Results: Commercial Real Estate Market Participants See Recovery Beginning In 2010

We recently asked LoopNet members to tell us when they expected commercial real estate sale market to bounce back. More than 1,500 LoopNet members responded to the poll, which was conducted from May 7, 2009, through May 21, 2009.

Here are the results:


  • Only 1/3 (33%) of respondents expect Commercial Real Estate sales transaction activity to recover in 2009. A plurality of respondents (42%) is not expecting the market to pick up until 2010, and a large number (26%) are not expecting recovery until 2011.

  • Nearly half (46%) of respondents see access to capital as the most significant obstacle to recovery. Economic uncertainty, which in turn significantly influences asset pricing, was the second most cited obstacle, at 29% of respondents. Close to a quarter (23%) of respondents explicitly cited differences in pricing expectations between buyers and sellers as the most important obstacle. While the results were largely consistent across all three major participant segments, owners rate the importance of access to capital slightly higher, and differing price expectations slightly lower, than brokers or investors.


  • Two thirds (66%) of respondents expect that price declines of 10% or more from today’s prices will be required to restart the market, with 37% predicting 10-20% declines and 30% predicting declines north of 30%.
  • As a group, owners are more optimistic, both in terms of recovery timing and expected price declines, than are investors and brokers.


Tell us what you think. What do you think is the major obstacle to a rebound? What has been your experience with accessing capital needed to complete a transaction?


21 comments - Post a Comment:

Anonymous said...

I have clients who would like to purchase properties from $1.9M to $42M and there is no financing options for them. When financing is available sales will close.

John Edelmann

Taly Brinzey said...

I believe that sellers are still expecting to sell a leased property at a cap rate of 7-8%. I have investors ready to move but at a 10-11%. If sellers get real it will start moving

Anonymous said...

I agree with Taly's comment. There are too many opportunities for well-heeled investors to accept low cap rates in a higher risk market.

Ken Martin, CCIM said...

In our area of S.E. Florida we are experiencing a "freeze" of activity based on lack of access to capital, differences between ask and offering prices and lack of confidence for Buyers. Cash Buyers are out there but the investors expectations for returns are well above 10%.

In our market I feel that 2011 will be the turning point. We are still watching vacancies go up across the board and lease rates tumble. The volume of activity in some areas is less than 15% of 2008 YTD.

Liana Mirea said...

The positive aspect of financing a commercial property today, is that Sellers are now more open to Owner Financing, which can work very well for the User-Owners! Lower down payment, good interest rates, can help any Buyer interested in taking advantage of the market today!

Victor Merhaut said...

I believe that commercial market may rebound in 2011 earliest, as economic indicators are not favorable for 2009 and 2010. The residential market is still experiencing a tidal wave of foreclosures, the economy is in recession and unemployment rate is too high. Credit is too tight and retail sales are down, industrial production is at lowest level since 1998. The lack of affordable financing is going to continue well into 2010 and 2011. Valuation is also a problem as an adjustments of 10-25% are needed to reflect the realities of today's commercial markets. Even the multifamily properties must be re-valuated to reflect the lower rents,vacancies and rent concessions.

Victor Merhaut
www.vmloans.com

Anonymous said...

Until banks begin to thaw out and free up capital, and seller's begin to realize current asset values, this difficult market will continue well into 2011!

Anonymous said...

Both residential and commercial markets are tight. I have clients quoted 50%LTV on 8 million dollar deals. My bank clients tell me point blank they are not lending because they anticipate the economy getting worse. They know the massive volume of foreclosures still to come.

Scott Hensley said...

I am no longer blaming the lenders for all of the CRE problems. Local and regional banks are lending $$ but with conservative (or more traditional) underwriting criteria - 25 - 30% down on good real estate. The bigger issues are 1) lack of confidence among buyers 2) seller and buyer expectations. Until we start having some transactional volume - no one really knows where values are - with out sales it is hard to value a property.

Scott Hensley, CCIM, SIOR

Jeff Dowdle said...

Anyone who thinks this will turn around before 2011 is being too optimistic. We have 500 million in CMBS debt coming due next year just in Dallas and I doubt the banks will be able to swallow that amount and refinance that debt. The commercial CMBS market is the next shoe to drop. Once that happens it will force banks to take back deals and help reset the prices through the REO sales. Right now they are all just rubber stamping extensions for debt coming due this year. So next year will be a blood bath and then we will all get to deal with inflation as well as we recover which will also make our market struggle since rates could be back 20% just like in the Jimmy Carter days!! Yes WE Can!!! no thanks.

Anonymous said...

There are plenty of sales to use for comps. Sellers do not want to believe that there properties are just not worth what they paid for them. FYI: In PA: Abington Bank just lost 15 million on a condo project at 101 Walnut Street in Philadlephia-the real esta trust company went under on teh project-property will be going up for auction according to local news sources.

Kelly Muldrow said...

I believe the scales will begin to tip when small businesses begin to recover and grow. Our area is plagued with vacancies. Landlords are pressuring us to fill empty buildings, but small business ventures are either failing, stagnant, or being mothballed until they can get access to affordable funds.

Evan Langert, Esq. said...

This is a national poll, and while there are common themes across the board, some areas and some product types will normalize more quickly than others. I notice in the posts that people predicting doom and gloom for a longer period of time tend to be in areas that were harder hit in both the residential and commercial arenas. That makes a lot of sense, of course. I think that it is a mistake to read the national poll and to make a blanket assessment of every product type in every market. For instance, San Francisco and the peninsula between San Francisco and north San Jose is not doing anywhere near as poorly as the outlying Oakland and East Bay markets are, and our recovery will be sooner and faster than most markets in the United States.

Matthew White said...

It would not be prudent to ignore the impact of the tremendous amount of existing debt currently weighing down residential and commercial real estate consumers when prognosticating on recovery timelines. The painfully obvious lack of funding referenced in the poll is strongly influenced by the diminished 'credit worthiness' of many who have participated in past healthy real estate markets. The fact is that from major corporations all the way down to Joe six-pack, debt is an anchor that will continue to weigh upon any true and speedy recovery and a problem not easily remedied.

Anonymous said...

I hear so many people say "well our area is not as effected as others." I used to believe that but more and more I see foreclosures and short sales popping up in even the most resilient markets and believe me when I tell you those new foreclosure sales/short sales are what all of the financial institutions are using in determining lending values for the next sales.

Tammie Birdwell said...

It seems to me that in deals where financing is the obstacle, the solution would be creative financing - seller financing, syndication, private equity, etc. Why are these solutions not being utilized?

Scott Livingston said...

I think we will begin seeing activity in 3rd and 4th quarter of '09. Private Equity and REITs that are raising capital have to make returns for their investors, and if they were never high-leveraged buyers to begin with, they will find distressed properties at fair values.

Rick Trono said...

It boils down to: The ability be able to service debt. If you cannot, than you "Have to Sell". And that seems to be the trend I am seeing... Prices will continue to soften.

Charlene Hines said...

So many of you have touched on valid points regarding commercial finance and the amount of time it will take for recovery. Many of the points are very good. It might do us all well to really put a fine point on the possibilities which are available. Many of the transactions in the past, for securing funds for commercial, were exotic and creative and those entities who acquired property with high LTV's have fallen on hard times due to economic factors and so many other elements. We haven't seen so much of it, yet, as compared to residential. But it could be evident very soon.

The real solution I see can be in utilizing solid instruments which are unique in the commercial funding arena, but, also, clearly evaluate fundable projects. Since residential projects have been difficult for lenders to support, scanning these files from a new perspective is actually creating solid funding sources. Even within the past few months, commercial lenders have shut down. The reality of the marketplace is that it is being redefined. Solid closings are still funding and new projects are still being completed. More programs are currently being developed even for new commercial construction.

I think the present time can be viewed as a metamorphasis of the industry. Most of us can benefit from a new mindset to create better consumer confidence by offering real value and restructure our expectations. This would be a grass roots approach. But, that really means a personal mentoring scenario with clients and colleagues. It also can mean that we 'tune in' more effectively to all concerned and really encourage King Arthur's philosophy of the "round table discussion". We can all be heard equally and develop balanced solutions to the industy needs.

I welcome conversation. There are more solutions available and we still continue to create many various niches of successful closings which are not always being reported accurately in the media.

Anonymous said...

We are going no-where until We clean out Congress and right the wrong on these Auto Co, Fire all these Czars, Who answer to no-one, only the Pres. Only a few will get the piece of the pie. Are we going to have to go GREEN on new const,or remodels, answer this and you will have the answer. Then watch Energy as Winter closes in, what is the price going to be paying for an EMPTY BUILDING

Darren Audagnotti said...

I agree with Charlie. Class A commercial real estate is what's being funded and that's where the deals are being made. What about the small to medium banks who did not securitize their commercial paper? I think that's a huge issue, congress may step in and bail them out to...I don't see a big change in 2010, but America's $14 trillion dollar economy with get through this soon enough. I'm sure a lot, if not most, of the U.S. politicians are invested in U.S. real estate. It's in their interest to make sure our commercial market doesn't tank.

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