Off-market deals are increasing each year, thanks to rising competition and high pricing. Many investors are leveraging industry relationships to buy properties and curb competition, while many sellers are finding that they can get better pricing off-market. Michael Koshet, an off-market specialist at KW Commercial who recently sold a five-property portfolio in the San Fernando Valley for $51 million, expects off-market activity to continue to increase next year again.
“I am seeing year-after-year, more off-market transactions. Consistently, the volume has increased every year,” Koshet tells GlobeSt.com. “That is because sellers are realizing that they will get a higher price for their property off market than on market, and it is a faster process. The less voices in the room, the better.”
In general, deal volume for multifamily product has slowed this year over the record-breaking activity in 2015 and 2016, but Koshet says that off-market activity—at least for his business—is increasing because hesitant sellers are being lured to the sell through the off-market process. “I am seeing a lot more people that would not traditionally be interested in selling are now interested in selling through an off-market deal,” he explains. “People at this point in the cycle are responding better to off-market offers and are considering deals that they might not have considered last year.”
In addition to higher pricing, sellers are gravitating toward the off-market method because the process is smoother and faster. “Sellers prefer off-market deals because it is a smooth closing and a smooth transaction,” says Koshet. “Sellers don't need to do the traditional route anymore. The market is so hot right now that you just need to say the price that you want, and—with the right broker—you can accomplish that price.”
The off-market activity isn't limited to sellers quietly shopping a property to buyers. Koshet says that he often receives inquiries from prospective buyers that want to make an offer on a property that is not up for sale. “It does happen. I do that on a daily basis. I am making offers between $100 million to $500 million every day,” adds Koshet. “I have a buyer in mind, typically, when I approach the seller.”
Next year, Koshet says to expect activity to pick up. Although he says he can't predict the future, he is hopeful that activity will continue to be strong. “There is no expectation of anything in the market that will cause a slow down,” Koshet. “I see more activity on the horizon for 2018. I hope that next year is double next year, and I hope more sellers take advantage of the market and the pricing.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Kelsi Maree Borland
