Market Slowdown Leads To Opportunities
The numbers are in… The first quarter of 2008 shows what we in the industry have been feeling for the past year; the market is slow.
The National Association of Realtors Commercial Alliance has released the first quarter numbers and when compared with the same period last year, the difference is staggering. Overall commercial volume is down almost 70% when compared with the same time period last year. What is the reason? No, it’s not ridiculous pricing or abundant commercial foreclosures, it’s simply the economy and lack of investor confidence. The big drop has been the lack of individual investor activity while the institutional grade investors continue to invest. The prime reasons for the slowdown are the downturn in the US economy which began in late 2007, rising oil prices and lack of job creations, all things that effect the commercial market.
Looking at multifamily in specifics, transaction volume for the same period last year is down by 46%. In addition, 80% of the transaction volume was through institutional grade investors such as REIT’s, pension funds, insurance companies, etc. This leaves a large gap in the market that is ripe for the savvy individual investor to take advantage of.
With the larger size investments still being traded and the lack of movement on the smaller, more individual investor friendly properties, the amount of available properties continues to increase and the needs of sellers continue to get greater. Many sellers are getting into time and money constraints which is an excellent situation for buyers with cash ready to go.
Another important note is that any and all investors wanting to purchase commercial investment real estate should be ready with a minimum of 20% equity to put into any investment as lenders are no longer financing “creative” deals that they did in years past. Everything is being underwritten based on the numbers now, not what could be in coming years.
It is imperative that you work with professionals who have experience in their local market who can get you connected with the right people to make each transaction as painless, quick and profitable each and every time.
Peter J. Barnett, CCIM
