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Offerings Rise May Kick-Start Sales

With five offerings for every closed sale, could the market be gearing up to see an increase in investment levels?

By Sule Aygoren Carranza | Updated on April 07, 2009

NEW YORK CITY-Not surprisingly, the sales volume for February fell short of the total seen just a year ago. The real story, however, is the potential investment activity the market could see in the next several months, thanks to the rising number of distressed opportunities that is likely to hit the market. That’s the conclusion of Real Capital Analytics in its most recent Capital Trends Monthly report.

The locally based research firm reports that just $2.7 billion of commercial property changed hands in February, with apartments accounting for $600 million of that total. But a look at the number of properties in trouble is a telltale indicator of potential activity. Some $5.7 billion worth of commercial property “spilled into trouble through default, foreclosure or bankruptcy” in February, and the amount of assets on the sales block ballooned as well, coming in at $11 billion across all property types.

Compared to closings, the level of offerings “is rising off the charts.” In the apartment sector alone, there were five offerings for every one closing so far this year–a bit higher than the overall market and significantly higher than the one-to-one ratio in ideal times.This supply-demand incongruity is putting downward pressure on prices, and this “is likely to only worsen over the near term since behind the statistics are sellers that are rapidly morphing from pressured to distressed, while buyers are content to wait,” say RCA analysts.

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