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VANCOUVER, BC-The global economic downturn will "take the steam out of" office deals and other investment sales in 2009, according to a new report. Avison Young (Canada) Inc.’s year-end investment review for 2008 and outlook for 2009 says that office properties were the most prominent assets traded in second half of 2008, but those transactions represented the high-water mark for prices in this cycle.
The Avison Young report, which tracks office, industrial and retail investment sales in BC greater than $5 million, notes that the majority of the deals that closed in the second half of 2008 were negotiated in the early part of 2008—before Lehman Bros. filed for bankruptcy. Michael Gill, Avison Young principal, points out, “Deals were already firm before the credit markets imploded and, therefore, year-end sale prices did not reflect current values.”
Gill says most of 2008’s transactions represented sellers who wanted to take advantage of the market at its perceived peak. He says that deal activity is anticipated to decrease significantly in the first half of 2009 due to a slowdown in executive decision-making, market perception versus reality, and as the price expectation gap between buyers and sellers takes time to narrow. “Although the underlying fundamentals of BC are among the strongest in North America, the crisis of confidence has permeated the commercial real estate market. In the final two months of 2008, many deals fell apart,” he says.
Avison Young principal Robert Gritten observes that values are already falling this year for prime properties as as cap rates trend upward. Values are falling further for less-than-prime properties and troubled properties, he adds.
Office transactions accounted for 50% of the total dollar volume in 2998, with private investors dominating both the buying and selling sides throughout the year. The sale of Crestwood Corporate Centre in Richmond, BC for $203.5 million was the largest deal of 2008 and accounted for 40% of the total value of office deals closed in the second half of 2008.
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Cheers
Marc
The Avison Young report, which tracks office, industrial and retail investment sales in BC greater than $5 million, notes that the majority of the deals that closed in the second half of 2008 were negotiated in the early part of 2008—before Lehman Bros. filed for bankruptcy. Michael Gill, Avison Young principal, points out, “Deals were already firm before the credit markets imploded and, therefore, year-end sale prices did not reflect current values.”
Gill says most of 2008’s transactions represented sellers who wanted to take advantage of the market at its perceived peak. He says that deal activity is anticipated to decrease significantly in the first half of 2009 due to a slowdown in executive decision-making, market perception versus reality, and as the price expectation gap between buyers and sellers takes time to narrow. “Although the underlying fundamentals of BC are among the strongest in North America, the crisis of confidence has permeated the commercial real estate market. In the final two months of 2008, many deals fell apart,” he says.
Avison Young principal Robert Gritten observes that values are already falling this year for prime properties as as cap rates trend upward. Values are falling further for less-than-prime properties and troubled properties, he adds.
Office transactions accounted for 50% of the total dollar volume in 2998, with private investors dominating both the buying and selling sides throughout the year. The sale of Crestwood Corporate Centre in Richmond, BC for $203.5 million was the largest deal of 2008 and accounted for 40% of the total value of office deals closed in the second half of 2008.
Read more...
Cheers
Marc