Commercial property sales fall by 60% in first half of 2008

Just $3 billion worth of commercial property was sold in the first half of 2008, a 60% fall on last year, according to data from real estate firm CB Richard Ellis.

Just $3 billion worth of commercial property was sold in the first half of 2008, a 60% fall on last year, according to data from real estate firm CB Richard Ellis.

CBRE executive director Kevin Stanley says the amount of investment activity in commercial property has fallen to its lowest level in 15 years thanks to growing concerns about the credit squeeze and the state of the global economy.

While there is a large amount of property for sale, buyers are reluctant to wade into the market, only to find that a few months later a tenant goes out of business or moves on.

Investors also seem content to see whether prices have a bit further to fall. “Buyers appear reluctant to commit at this time, uncertain whether prices may fall further on the back of an increasing cost of borrowing,” Stanley says. But getting a feel for the direction of commercial property pricing remains difficult, given the low number of sales in recent months.

The CBRE data, which is based on commercial property sales above $5 million, shows that retail property has been hardest hit by the slowdown, with sales volumes down 84% on the same period in 2007. However, this may be a reaction to a big jump in prices for retail property in recent years.

Sales in the industrial sector were down a significant 68%, albeit off a lower base, while sales in the office sector dropped 28%. But Stanley says this sector hasn’t performed too badly, with its share of all commercial property sales increasing from 44% to 74% over the last 12 months. (Typically the office sector represents about half of all commercial property sales.) “The underlying fundamentals in this sector are the brightest of all, with vacancy still very low and construction activity moderate.”

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