The 20 Rising Stars of Real Estate 2008 - (Page 6) As Overall Sales Volume Slides, Pockets of Hope Emerge Ongoing economic concerns are expected to continue to put pressure on overall sales volume this year, but some sectors are showing subtle signs of near-term improvement By Mark Malyszko ter. One key reason for the decline is that the major portfolio deals from last year cannot get financing this year, he explained. Of the overall volume for the first quarter of 2007, about $42 billion was in privatization. White said it is possible that total for this quarter could be zero. In addition to the current market conditions, the overall U.S. economy is becoming a bigger factor for commercial real estate. “My opinion is a greater economic uncertainty,” he said. “How much worse is it going to get?” REFUSING TO SELL LOW Volume is down across every sector when compared with both the first quarter of 2007 and last quarter. Market observers and real estate brokers and lenders agreed that the mortgage crisis and the resulting credit crunch are to blame. But so is a pricing war. The most significant drop by both dollar volume and percentage, compared with last year’s first quarter, is in the office sector, according to data provided by Real Capital Analytics. The total sales volume for office space was $79.21 billion in last year’s first quarter, but it was a paltry $6.66 billion as of the end of January 2008. The slowdown in commercial deal volume can be attributed to disagreements and a wait-and-see approach on pricing. White said the sort of distressed selling that is occurring in residential home sales is not happening with commercial property sales because building owners are less willing to budge on prices. The market is at the beginning of a re-pricing phase, according to Michael Szwajkowski, president of the structured finance business at CapitalSource, a Chevy Chase, Md.-based provider of asset-based, cash flow and mezzanine financing to small and mid-sized borrowers. “Today we sit at a pretty interesting vantage point,” he said. “It’s going to take a fair amount of time for capital to come back into the market.” He believes this adjustment period will continue for the next two to three years and will be crucial for how real estate prices will play out over the next decade. Retail may be the slowest to recover, White noted. Retail MARCH 2008 C OMMERCIAL REAL ESTATE SALES volume has been slipping following a spike in mid-2007, and ongoing economic concerns are expected to continue to put pressure on overall sales volume this year. Although salvation appears nowhere in sight in the near term, there is hope in some corners. Overall deal volume for the first quarter of 2008 so far totals $23.95 billion, a drop of about 75% from January 2007, according to data provided by Real Capital Analytics. According to Bob White, founder and president of Real Capital Analytics, the February numbers that he is starting to see are indicative of a continued significant slowdown in volume. White predicted a cooling in sales volume to continue through next year because of some near-record highs in 2007. Total sales volume in the apartment, hotel, industrial, office and retail sectors for the first quarter of 2007 was $145.61 billion—the highest of any quarter in both 2006 and 2007, according to Real Capital Analytics. Volume for the current quarter also will be down from the last quarter, when it totaled $120.05 billion, White said, predicting a drop of about one-third in overall volume for the quar6 REAL ESTATE RISING STARS
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