The year "ended only slightly better than it started," writes Barbara Byrne Denham, chief economist for Eastern Consolidated, in the report. Preliminary estimates for '09 show a total for the year of $5.5 billion, dropping nearly 77% from the $23.6 billion total for 2008 and nearly 92% from 2007's tally of $62.8 billion. By comparison, Manhattan commercial sales volume averaged $10 billion annually in 2001 and 2002.
Multifamily property sales in Manhattan reached $392 million in the fourth quarter, Eastern Consolidated says. That's down from $410 million in the Q3 but well ahead of the Q1 and Q2 volumes of $195 million and $310 million, respectively. For non-multifamily commercial sales, Q4 volume was $740 million, off from Q3's tally of $1.1 billion but better than Q2's $650 million.
"Most in the industry are happy to see the year close, but only a hint of optimism looms on the horizon," Denham writes. "Lenders are starting to sell some of their bad loans, generating hope from those eagerly awaiting the emergence of the distressed property market, but these loans represent little more than a trickle. Many are expecting the distressed market to grow imminently."
To that end, the volume of distressed properties now tops $165 billion in the US, a $115 -billion rise year over year, according to Real Capital Analytics. The FDIC has appointed 14 firms to help it dispose of a "huge amount" of real estate from failed banks, says RCA. "Although new additions have not yet slowed, with another $12.5 billion added in November alone, the outstanding volume of distress will likely peak in 2010."
In fact, RCA declares, "we have hit bottom and are starting the new decade on the upswing." The research firm cites a number of positive developments for this assertion, including the increase in transaction volume, the growth of interest from overseas, the availability of equity capital, the easing of the credit crunch and—ironically—the continuing weakness of commercial real estate fundamentals.
"The truly good news is that the market has already priced in the poor outlook for fundamentals, expecting the worst," according to RCA. "Thus there is only upside, since expectations are so low."
In the Eastern Consolidated report, chairman and CEO Peter Hauspurg observes, "Banks remain tight on lending, but some are starting to off-load loans bought or made during the peak 2006-2007 market. While there are plenty of buyers for these loans, the bid/ask gap is still wide, although it continues to narrow. Once pricing expectations are aligned, we expect a flood of sales as there is enormous pent-up energy in the market."
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
