The uncertainty and fear that gripped the commercial real estate investment market in 2009 and led to a sharp drop in property sales and development activity is strongly reflected in NREI's 2010 Best of the Best, a compendium of surveys. Brokerage giant CB Richard Ellis, for example, posted a 30% drop in investment sales and leasing transactions globally by dollar volume in 2009 compared with 2008.
U.S. property sales across the five major product types — office, industrial, retail, hotel and multifamily — totaled $54.2 billion in 2009, down from $502.6 billion in 2007, according to Real Capital Analytics. That's nearly a 90% drop from the peak of the market. (The totals are based on deals $5 million and above.)
Adding insult to injury, mounting job losses and a credit crunch resulted in a huge drop in demand for real estate space in 2009, forcing many developers to put the brakes on new construction.
The malaise that has hung over the commercial real estate investment market the past few years is due in large part to a bid-ask pricing gap between buyers and sellers. Buyers don't want to be in the position of catching a falling knife. As of March 31, prices of commercial and multifamily properties had fallen 42.1% from their peak, according to the Moody's/REAL Commercial Property Price Index.
Buyers who think prices still have further to fall have been reluctant to pull the trigger on deals, particularly amid growing concerns about the possibility of a double-dip recession. It is likely going to take robust job growth to allay investors' worries.
Still, industry experts are encouraged by trends unfolding in 2010. Year-to-date through April, property sales totaled $19.6 billion. At the current pace, the industry can expect to notch at least $60 billion in property sales in 2010, though many industry analysts expect that figure to be much higher as more distressed assets come to market over the next several months. Meanwhile, rents and occupancies are beginning to stabilize as the U.S. economy rebounds slowly.
The 12 rankings that comprise the Best of the Best include the largest companies across several property sectors and industry disciplines. Due to the extraordinary financial challenges facing property owners, developers and lenders alike, some companies chose not to participate in this year's survey despite the editors' best attempts.
View the full 2010 Best of the Best rankings.