Feb. commercial property sales at 2-year low-report
Wed Mar 23, 2005 03:51 PM ET
NEW YORK, March 23 (Reuters) - Sales of significant U.S. retail and office properties in February reached their lowest levels in two years, a sign that rising interest rates may be prompting some private investors to sell, according to a set of influential real estate reports released on Wednesday.
"Long-term interest rates are finally starting to rise and the market is reacting," said Capital Trends Monthly, a set of reports by New York-based research firm Real Capital Analytics. "The immediate effect has been a spike in the supply of properties offered for sale."
As interest rates climbed, sellers have put "for sale" signs out on more than $30 billion worth of commercial real estate in January and February -- about $7 billion more than the dollar amount of the deals closed.
However, as long as real estate continues to outperform the stock and bond markets, the research firm said, funds will continue to flow into real estate. Last year, sales reached $180 billion in 2004 for properties worth more than $5 million.
"Even though the supply of offerings has surpassed sales volume so far this year, it has not exceeded the pent-up demand of buyers," the reports said.
RETAIL AND APARTMENT SALES DROP
By real estate category, sales of significant retail real estate slowed to a nearly two-year low of $1.6 billion in February. However, $3.2 billion of transactions were put under contract. Meanwhile, offerings of properties for sale in January and February reached $5.9 billion -- 50 percent more than the volume of closings, according to the reports.
Real estate investment trusts and institutions emerged as the chief buyers of retail property, according to Real Capital Analytics. The research firm expects Australian buyers to continue to snap up retail property.
Sales of significant apartment properties slowed to $3 billion in February, the first year-over-year sales decline in 18 months. Condo converters, those who buy apartment buildings and convert them into condominiums, accounted for 20 percent of the purchases in February, down from 45 percent in January.
Offerings of new apartment properties for sale reached near-record levels of more than $3.6 billion.
OFFICE PROPERTY SALES SLIDE
Sales of office properties slowed to $2.7 billion in February, the lowest level in almost two years. Offerings reached a near record level of $15 billion in January and February, versus $8.6 billion of completed sales.
However, like retail, buyers are still sweeping up properties for sale, with more than 25 percent of those offered reported in contract. About 75 percent of the properties that hit the market in the fall have found buyers, and $9 billion of office properties were reported in contract at the end of February.
Private buyers, armed with cheap capital, helped edge out institutional and real estate investment trust buyers over the past year and a half. However, in the retail and office sectors, their acquisitions have fallen. In the retail sector, their share of dispositions rose to 65 percent in February from 50 percent a year earlier.
In the office sector, private buyers' share of acquisitions dropped to 45 percent in February from 55 percent a year ago, and they have become net sellers, the Capital Monthly Trends reports said.
Industrial property sales bucked the trend in February, totalling $1.6 billion, up 50 percent over the past year. |
