Weak Property Sales Market to Persist, LoopNet Poll Reveals

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When will the moribund property sales market begin to recover? That’s one of the big questions hanging over the commercial real estate industry like a dark cloud. Property sales during the first half of 2009, for example, equated to just 7% of the volume notched during the first half of 2007, the height of the previous boom, according to Real Capital Analytics.

The results of a new poll conducted July 16-24 by LoopNet Inc. of more than 2,000 of its members don’t offer much encouragement to dealmakers. Only 10% of respondents expect to see a recovery in sales transactions this year, down from 33% in the May survey. Meanwhile, the percentage of respondents who expect a recovery in property sales transactions to wait until 2011 has risen from 25% to 33%.

Participants in the survey administered by San Francisco-based LoopNet (Nasdaq: LOOP) — the giant online real estate listings provider — include commercial real estate investors, brokers and owners who use the LoopNet marketplace to search for available space and investment opportunities.

The recession, credit crunch, and weak operating environment have combined to take a toll on valuations, the survey shows. Two-thirds of respondents expect further price declines of more than 10% in commercial real estate. The most prevalent prediction is for prices to drop an additional 11% to 20%. About one in five respondents expects prices to plummet 20% or more.

Owners are more optimistic about pricing than investors, the survey shows. Among owners participating in the LoopNet Pulse Poll, 28% believe that pricing has bottomed out already or will decline by an additional 5% or less. But only 19% of investors believe that pricing has bottomed out. Some 28% of investors expect additional price declines of more than 20%, whereas only 19% of owners are so pessimistic.

The outlook among brokers lies between owners and investors. Some 18% of brokers expect prices to drop an additional 0% to 5%, while nearly one in five brokers predicts price declines of greater than 20%.

The majority of respondents (60%) expect prices to bottom out between the fourth quarter of 2009 and the third quarter of 2010. Slightly more than one in six respondents (17%) expects price declines to continue through 2011.

The overwhelming consensus among respondents is that multifamily offers the best opportunities for long-term investment.

The dearth of property sales has taken its toll on brokerages and real estate listings providers alike over the past year. The share price of LoopNet stock closed July 29 at $8.12, down from its 52-week high of $12.50, but well above its 52-week low of $4.75.


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