Property deals down by almost half

Worldwide property sales fell dramatically during the first quarter of 2008, with 46 percent fewer deals this year compared to the same period in 2007. Commercial property sales were valued at just $154 billion (€94 billion) in the first three months of 2008, against $283 billion in 2007.

Transactions in the Americas and Europe were the most affected, with deal numbers down by two-thirds in the US and Latin America combined, and 40 percent lower in Europe, according to a report from Real Capital Analytics.

In the Americas, quarterly sales were valued at $49 billion in the three months to April this year, compared to $149 billion 12 months ago, while in Europe sales were down from $95 billion in 2007 to $56 billion this year.

In the US in particular, the credit crunch has been hardest felt with all property sectors seeing a fall in sales volume. Office and retail were the worst affected with sales down 81 percent and 80 percent respectively. Investments in Mexican and Brazilian hotel, office and development land saw significant increases in sales volume over the past year, of up to 2,000 percent, but failed to make an impact on the overall picture accounting for less than 10 percent of all deal flow in the region.

The credit crisis has also made portfolio and entity-level transactions increasingly difficult, according to RCA, with just one $3.3 billion entity-level transaction in the first quarter of 2008 compared to $86 billion the year before. Portfolio transactions also feel by 60 percent, while individual property sales were down overall by a third.

The European markets – which saw declines in the sale of UK hotels, retail and offices – received a small boost from the $2.85 billion sale-leaseback of Banco Santander’s headquarters in Madrid by UK real estate investor PropInvest, a record price for a single office building sale. The emerging markets also proved their strength in the first quarter with office transactions in Poland and Bulgaria up from 39 percent in 2007 to 198 percent this year. Land deals in Eastern Europe also rose 325 percent in the first quarter this year compared to 12 months ago.

In Asia, the story of the growing emerging markets was seen again with a 27 percent increase in overall sales volume during the past 12 months. Japanese retail, hotel and apartments were down in the first quarter of 2008, but development sites in China and India helped offset Japan’s poor showing. Japan offices were boosted by the $1.55 billion acquisition of the Citigroup Center and Shuhsei Bank headquarters in Tokyo by Morgan Stanley.

Indian retail saw the largest percentage increase year-on-year, reporting a 7,500 percent increase in sales in the first quarter of 2008, to $1.5 billion.

However, according to RCA Asia's gains in the first quarter of 2008 could start to slow with volumes reportedly down 25 percent in March compared to one year ago and April’s sales totals set to be even weaker. “Global market factors are certainly contributing to the slowing market, but new regulations on land deals instituted by China are also partly respon­sible. From October through January, auctions of major land parcels in China totaled over $10 billion each month, but since the new regulation, the average monthly volume has sunk to $3 billion,” the report said.