LAS VEGAS — The velocity of U.S. retail property sales across the industry plunged 40% in the first quarter of 2008 on a year-over-year basis, according to brokerage firm Marcus & Millichap, reflecting a major pricing gap between buyers and sellers. What’s more, a bifurcated sales market has emerged. Among properties valued above $10 million, deal volume nationally dropped a whopping 60% compared with a 20% drop for properties under $10 million.

“If you are taking an offering to market north of $10 million, from a strategic point of view you better establish the pricing to get buyers’ attention quickly or sit on the property,” says Bernie Haddigan, managing director of the National Retail Group for Encino, Calif.-based Marcus & Millichap. Haddigan’s comments came at the Las Vegas Hilton on Monday during a one-hour program, “Bulls or Bears: Which Will Drive Your Real Estate Strategy?” hosted by Marcus & Millichap.

One reason for the dip in property sales above $10 million is that up until recently many buyers relied heavily on commercial mortgage-backed securities (CMBS) as their principal source of financing. But with CMBS debt capital drying up due to the credit crunch, buyers have been forced to pursue other financing alternatives.

“Sales velocity in the $40 million plus-price range declined dramatically upon the onset of the credit crunch and was down nearly 85% during the first quarter compared with the same quarter a year ago,” wrote Nadji in a May 19 research note focusing on the second half of 2008. “The lack of CMBS debt capital is having the least effect on the lower price ranges, where investors have generally relied on funding from regional and local banks.”

Sandeep Mathrani, executive vice president of Vornado Realty Trust, which owns retail properties totaling more than 31 million sq. ft., expects cap rates to rise 100 to 200 basis points on retail properties nationally over the next year or so, and about 50 to 100 points in the New York market.

“I think that we’re going to have a double-dip [recession],” says Mathrani. “We’ll sort of recover in the fourth quarter, and then come spring 2009 is when the interest rates will go up and cap rates will move up, and I think that we’ll be back to the sentiment not being so good.”