Sales of commercial real estate in the Denver area plummeted 55 percent last year compared with 2008, according to a report by LoopNet.
Sales plunged to $1.3 billion in 2009, down from $2.8 billion the previous year.
However, many real estate professionals expect transaction volume will recover this year as the value of best-in-class, or “core,” properties increases.
“We’re seeing, on core properties, 20 to 30 bids per deal, like it was two and three years ago,” said Mike Winn, executive vice president at Cushman & Wakefield Inc. “Competition is ferocious for quality assets.”
Winn said he also expects lenders in 2010 will start to sell lower-quality properties at attractive prices as leases reset to market rates, vacancies rise and income decreases.
“We think we’ll see less willingness on the part of lenders to extend loans,” he said. “This will lead to more properties coming to market.
“The low transactional volume in 2009 was held back more by a lack of properties for sale as opposed to a lack of capital. Buyers are eager to buy commercial properties again.”
Office
Sales of office properties plunged 79 percent, the biggest decline among all commercial real estate sectors, according to LoopNet.
Last year, $228 million in office properties sold, compared with more than $1 billion in 2008. The $134.2 million sale of 17th Street Plaza in May accounted for more than half of the volume last year.
“Debt was unobtainable, period,” said Mary Sullivan, executive vice president at CB Richard Ellis who handled the 17th Street Plaza deal.
There is demand for office properties from real estate investment trusts and private equity funds, but because values have dropped, there are few owners willing to put their buildings on the market.
“There is enormous pent-up demand,” Sullivan said. “There is too little supply on the market to meet the demand.”
Retail
The LoopNet data indicates a 14 percent increase in retail deals, from $487 million in 2008 to $555 million last year.
However, the analysis included a $347.3 million transaction in which The Macerich Co. formed a joint venture with GI Partners; no real estate actually traded hands.
Without that deal, the transaction volume actually declined 57.4 percent.
“I’ve seen activity increase as prices have continued to fall, but I don’t think they’re done falling yet,” said David Fried, senior vice president at Fuller Real Estate. “Until we really understand what our future looks like, the only projects that are going to sell are going to be the very best projects and the projects that are deeply discounted to reflect the risk people have to make to buy them.”
Industrial
Sales of industrial properties tumbled 65.8 percent, from $571 million in 2008 to $195 million last year, according to LoopNet.
LoopNet’s research found that the price per square foot has dropped from $67 to $60 over the same period, but Denver-area real estate professionals say the picture is much grimmer. “We’re thinking values have gone down a minimum of 30 percent or even 50 percent in some cases,” said Mitch Zatz, senior vice president at Jones Lang LaSalle. “A lot of people are losing buildings to the bank right now. We’re hard-pressed to get 60 percent of what a property was worth six months ago.”
Apartment
Apartment deals dropped 59 percent, from $693 million in 2008 to $283 million last year.
“The primary reason there wasn’t more activity in 2009 was because most buyers were expecting to see a large volume of bank- owned properties, and that didn’t happen,” said Steve Rahe, senior vice president of Grubb & Ellis’ multifamily investment group.
The price per unit declined from $78,724 in 2008 to $70,394 last year, likely a result of older properties selling for lower prices.
“Most of what sold in 2009, which wasn’t very much, was apartments built in the 1960s and 1970s,” Rahe said. “We saw more sales of newer properties in 2008.”
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
