Let’s face it, when a feeding frenzy happens those eating do not get very particular. With the cheap credit and huge deals driving appreciation in the top end commercial markets, there were deals on the table that a sober analysis would send the buyers racing for the exit. But there was a feeding frenzy going on so sober analysis was not a skill set in demand.
But the credit crunch took the edge off things, and once a sober analysis was done on some of the deals on the table, deals that had to be done are now being shrugged off and left for dead. Of course the naysayers will say that the commercial market is tanking, but I do not think this is the case. Instead, there is a calm coming into the market that will save many companies from going off the cliff and prevent banks from making bad loans.
And we are not talking about deals that are about the local office complex or shopping center. These deals tend to be going through regularly. We are talking about the 30 story grade A office building moving for huge multiples of future rent that are glamour properties in a city.
One of our sponsors MyNextDeal has a great tool for following the commercial markets in your town or city. Just plug in your zip code and see who is selling what for how much. There you will see there is still a vibrant commercial market in the hometowns across America.
Nevertheless, the recent increases in the cost of borrowing money could make pending real estate purchases less profitable in the long term, prompting some buyers to walk away or to try to negotiate a lower price, he said.”There has been a spike in the last 30 days of deals falling out of contract,” Mr White said. “People planning to close deals last month got hesitant.”
Many buyers were waiting, he said. If the market calmed in coming weeks and borrowing became easier, they would proceed with their purchases. If lenders were still wary of funding real estate deals, most buyers would have to decide whether to bale out or proceed and take a loss. “There aren’t a lot of pressured sellers out there. It’s not like the residential market,” Mr White said. “If they can’t get their prices now, they can afford to wait. Probably a lot of assets just won’t trade.” smh.com.au.
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