Ten-X: Auction Sellers Get More Realistic About Pricing

With commercial real estate transaction volumes declining by as much as 70% in the second half of the year, online auction leader Ten-X tightened its evaluations of whether auction opportunities actually will lead to trades.

The auction platform still boasts 95-day list-to-closing times for its auctions, but has seen its 60% trade rate move closer to 50% in recent weeks, James Searles, regional director for Ten-X in NYC’s Tri-State market, told GlobeSt.com.

At the same time, sellers are getting a bit more realistic about the transaction prices they can expect their properties to fetch, Searles said, in a telephone interview from ICSC New York.

“It’s really hard for sellers to get comfortable with walking away from a valuation that a couple of years ago they might have thought was X, and now it’s significantly lower than X,” Searles said.

What Ten-X calls the “flex”—the difference between a seller’s initial asking price and a price that leads to an accepted transaction on the platform—has increased in the fourth quarter to as much as 13%, more than double the second-quarter level of 6%, he said.

“Our clients are still adjusting, flexing in order to transact,” Searles said. “In many cases, we’re able to get additional bidding activity from the market after that flex is applied and the owner is able to recoup some of that value in the transaction.”

Lenders increasingly are looking to the auction process to offload properties with maturing loans in an expedited process, he said.

“As these loans come due, there’s uncertainty [regarding] what to do with the property,” Searles said.

“The banks don’t have the infrastructure in place to take the properties back and manage them, so we’re having those conversations where the auction process is a viable way to take those properties back and offload them in an expedited manner to people that are ready to own and operate them,” he said.

“The reality of the situation is that it’s not going to be getting any better [soon]. People are beginning to understand that the longer they wait to transact, the more that equity is disappearing,” Searles added.

Searles told GlobeSt.com that the retail sector is second only to hotels in outperforming all other asset classes on the auction platform. The Ten-X director said the platform has performed due diligence on more than 30,000 potential buyers of retail assets this year, with an average of 8.3% fully approved in terms of the ability to transact.

“Strip malls always have done well on our platform as it relates to a larger metropolitan area like NYC, where you can get more retail-condo or mixed-use applications,” he said.

The online auction platform offers a geographic advantage over traditional markets, with more than half of buyers on Ten-X typically coming from outside the state where the auctioned property is located.