Real estate deals down 57% globally in 2008

The number of commercial property transactions has dropped off significantly in the past three months, according to a report by Real Capital Analytics – including in Asia. Macklowe, Fortress, Morgan Stanley, Aviva and GE are the world's biggest sellers of real estate.

Commercial property deals are down globally by 57 percent over the past year, with transaction volumes off by as much as 77 percent in countries such as the US, according to a report from Real Capital Analytics.

Even Asia is not escaping the credit crunch, with the pace of property sales down by 18 percent f in the year to August – with deal flow expected to decline by as much as 68 percent in the third quarter of 2008 compared to the previous 12 months.

The RCA report has highlighted what private equity real estate deal guys have known for the past month – that transactions are almost impossible to close in the current environment.

Indeed, according to the Global Capital Trends report, all property sectors across the globe are being affected by the credit crunch – with hotel and office experiencing the greatest contraction in sales so far this year with transactions down by 71 percent and 65 percent respectively in the year to August. Sales of retail, industrial and apartment were also down globally by 62 percent, 48 percent and 49 percent respectively.

Land and development rights fell the least, seeing a decline of just 19 percent in sales in the 12 months to August. However the sector is expected to fell the full force of the downturn in the third quarter – with transaction volumes estimated to fall by 72 percent compared to the year before.

The US has been one of the worst affected real estate markets during the credit crunch, with new property offerings outpacing the number of closed deals by two-to-one.

Highly-leveraged sellers such as Macklowe Properties were among the biggest property sellers in the year to August, as the credit squeeze forced them to liquidate assets. Macklowe Properties sold $6.5 billion of property, according to the report, following by Fortress Investment Group on $6.4 billion, Morgan Stanley on $4.8 billion, Aviva London on $3.9 billion and GE Capital on $3.8 billion.

Sales of assets from the Archstone apartment company, taken private by Lehman Brothers and Tishman Speyer for $22 billion in October 2007, accounted for 12 percent of all apartment sales in the US since June.

One consequence though of tighter credit conditions, the report added, was the proliferation of equity joint ventures. “With significantly more equity needed to get deals done, investors are teaming up or taking on equity partners to complete transactions,” the report said. Around a fifth of all property acquisitions worldwide are made jointly between two or more equity partners, while for deals above $250 million, 42 percent of all transactions are done through a JV.