According to Boston.com, Commercial Real Estate volume in Boston is down 86.5% compared to 2007. Comparing numbers side-by-side we only had $1.35 billion in property changing hands in 2008 compared to approximately $10 billion in 2007. According to Cushman and Wakefield, available sublease space has nearly doubled to 900,000 sq. ft. from the Third to Fourth quarter of 08.
This is also going to affect future 2009 transactions. By having few sales in 2008, many Boston commercial real estate brokers and their clients are going to have a tough time pricing potential purchases. “Its a huge challenge right now for investors to figure out if they’re getting a fair price,” said Lisa Campoli, executive vice president at commercial brokerage Colliers Meredith & Grew. “During the last downturn in the 1990s, we had the S&L crisis and some banks went under, but there wasn’t the global lack of confidence we’re seeing right now.”
Commercial real estate, while not terribly similar to residential, is similarly affectly by the three major factors contributing to the residential downturn:
- Job Losses
- Lack of Available Credit
- High Leveraged Loans Defaulting
The funny thing is, many Commercial Real Estate brokers are saying that part of the reason they got into the mess is the reason transactions might go up in 2009. With many of these highly leveraged owners about to default, they will most likely be selling for losses in 2009 to cash heavy buyers, thus returning the market volume to levels somewhere near 2008′s.
“There are buyers with plenty of dry powder waiting to get back in the market,” Edward Maher, an executive director at Cushman & Wakefield, said “The only problem is, nobody wants to be first.”
Source: Boston.com
