Ten-X Transactions Accelerating as Sellers Get Real About Pricing

When CRE transaction volumes plunged last year in the steepest cliff dive since the Great Recession—as the bid-ask gap widened into a yawning chasm—most prognosticators hesitated to predict a turnaround in trading activity before the second half of 2024.

As the first quarter of 2024 comes to a close, there are signs that the transaction revival already has begun.

“We came into the year thinking we’d see a bump up in activity in the second half of the year. The good news is we’re seeing a bump up of activity almost immediately,” Steve Jacobs, president of online auction leader Ten-X, told GlobeSt.com.

According to Jacobs, every auction on the Ten-X platform so far this year has outperformed expectations.

In December, Ten-X saw its trade rate, traditionally around 60%, shrink to 50% as what it calls the “flex”—the difference between a seller’s initial asking price and a price that leads to an accepted transaction on the platform—expanded to as much as 13%.

Now, the flex is narrowing as the transaction rate is heading back up over 60%, Jacobs said.

“A lot of that has to do with sellers getting more realistic with their pricing,” Jacobs told us. “What we’re see is more acceptance on the actual pricing, more acceptance on the value. They were in denial, then they admitted they had a problem, now they’re doing something about it. That’s what happened to a lot of the owners.”

With more than $1T in loans backed by CRE coming due in the next 12 months—loans that would have to be refinanced at much higher rates—the moment of truth is confronting owners of what Jacobs calls “stressed” properties, assets with dropping values that are not yet delinquent on loan payments.

As owners with loans coming due increasingly are willing to eat more equity in order to make deals pencil out, more lenders also are opting to offload properties rather than take back the keys.

At the same time, buyers are itching to get back into the game, including players with mountains of dry power who are preparing to scoop up discounts as values keep dropping.

“Investors have been sitting on the sidelines for 18 to 20 months and they’re anxious to buy,” Jacobs said.

Ten-X is adjusting its evaluation of auction opportunities in response to shifting market conditions, he said.

In 2023, Ten-X looked at about $12B of auction opportunities and accepted $4.5B of those opportunities. It rejected more than $7B in opportunities where the disparity between what Ten-X thought the property was worth and what the seller wanted was more than 15% and Ten-X didn’t think the properties would trade, Jacobs said.

Of the more than $7B in opportunities Ten-X rejected, only about $300M in assets actually ended up trading, he noted.

With increasing transaction activity, Ten-X is “opening its funnel” and accepting more opportunities, Jacobs told us.

“Our approach is a little different this year. We’re opening the funnel up a little bit,” Jacobs said. “We’re taking a little bit more of the risks on some of the assets where the values don’t line up exactly because we are indeed seeing sellers meet the market more than they did last year.”