Square Deal just reported that the "Manhattan Deal Volume" is down only a mere 90%. in the first six months of this year, only 3 transactions greater than $30 million were reported. This is just 10% of what is normally reported.
The so-called capitalization rate, or a properties net operating income divided by purchase price, may have risen to about 7% for "stable and prime Manhattan office buildings."
Now if that doesn't rattle your cage Moody's Commercial Price Index as of 8-19-09 reports the "Decline is continuing." The Index peaked in October 2007 and since then we are off 35.5% "
I hope you enjoyed the great run-up in prices from between 2000 and 2005 because now we're seeing just the reverse and it's going to continue to get uglier.
I believe now that the Cap Rate for commercial real estate,in Massachusetts will probably hit 10%, if not higher which will drive down values ( and prices).
The critical problem is that fewer and fewer actual big commercial sales are being reported. No one knows, to any degree of certainty, what the commercial market is really doing. It's like the hospital X-ray machines and Cat-Scans are broken, or without power.
Maybe you like playing blind-mans bluff but bankers and savvy investors don't.
What we know is very few sales, fewer leases and we have a almost total lack of liquid capital for property financing or lease fit-ups.
What we know is that retail business has been hit hard and retail vacancies mount daily.
What we know is that the restaurant trade is suffering and even big franchise chains are offering special deals in an attempt to drive up volume.
What we know is that unemployment rates are climbing and consumer confidence, on the street, is not what media reports, in my opinion.
We know that residential foreclosures are bouncing rapidly upward again not because of the sub -rime swindles but because of homeowners are losing their employment. So residential inventory swells as we approach Labor day.
It's time for all to take of the blinders and this means commercial brokers, commercial agents, property owners and municipal assessors.
Bill McInerney
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