Commercial real estate sales up 24% in first quarter

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After a "wait-and-see" period prompted by the recession and the Sept. 11 terrorist attacks, the national commercial real estate market moved forward in early 2002 by posting a 24 percent gain in investment dollars, with brisk activity reported from coast to coast.|ret||ret||tab|

According to the CCIM/Landauer Investment Trends Quarterly, several factors support this report. |ret||ret||tab|

The first quarter of this year accounted for the fourth-highest dollar volume since early 1995, and the trend in national average capitalization rates remained very solid at 9.49 percent, a modest decline from the previous quarter's average of 9.57 percent. Cap rates, a measurement of future income to present value, have remained below 10 percent nationally for all property types since mid-1997.|ret||ret||tab|

The report, a broad-based survey of national commercial real estate investment activity, revealed the average deal price climbed above $20 million in first quarter after two quarters of consecutive decline. Furthermore, the number of sales reported to the database increased for the third consecutive quarter.|ret||ret||tab|

"Statistics from the first quarter suggest that investors came off the sidelines in force with money to spend," said Cynthia Shelton, Certified Commercial Investment Member and president of CCIM Institute. "Economic signs of a turnaround increased in early 2002, capped off by the government's revised gross domestic product estimate of 5.6 percent real growth. Overall, there is a general consensus that the recession has been both brief and shallow."|ret||ret||tab|

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Lower interest rates|ret||ret||tab|

Low interest rates during 2001 may be one factor that helped keep the recession in check, as well as open up opportunities for investors to leverage equity. |ret||ret||tab|

"The systematic reduction in interest rates during 2001 had created exceptional leverage for property market investors by year-end," said Hugh F. Kelly, CRE. "The deals registered during the first quarter showed that opportunity remained fully available as this year got underway. Expectations are that rates should stay stable through summer, with the possibility of slow and careful nudges upward by year-end."|ret||ret||tab|

Other key findings from the Investment Trends Quarterly are:|ret||ret||tab|

Continuing a trend from past reporting periods, investment dollars were spread across most property types during first quarter 2002. The historic leader, the office market, garnered nearly 25 percent of the deals, while the multifamily market received 20.7 percent. Industrial and retail properties each accounted for just over 18 percent of national sales. Land sales topped out at 11 percent, while the hard-hit travel industry kept hotel sales at just 5 percent.|ret||ret||tab|

As a property type, the retail market experienced mixed numbers when compared to fourth quarter 2001. The deal count on stores increased by 18 percent, yet the amount of dollars invested tumbled by 23 percent. From a regional perspective, the Pacific states led the nation with 44.8 percent of retail property sales.|ret||ret||tab|

For the second consecutive quarter, the Mid-Atlantic states led the nation in average price per deal, dispelling fears that the attacks on the World Trade Center would make investors wary of trophy properties. In first quarter, the average deal price in the region (New York, New Jersey, Pennsylvania, Delaware and Maryland) was $54.8 million, topping the previous quarter's total of $52.9 million.|ret||ret||tab|

The CCIM/Landauer Investment Trends Quarterly represents a broad-based sampling of first quarter 2002 transactions with a total value of $12.01 billion, the majority of which have been reported by CCIMs. |ret||ret||tab|

Since the survey was initiated in 1995, more than 12,260 transactions valued at $195 billion have been analyzed.|ret||ret||tab|

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