Cap rates for core commercial real estate products currently average 7.3%, the highest since 2005, and are increasing approximately 0.15% per month. Deals priced under $10 million are selling more than larger deals, with sales volume down only 44% compared to over 80% for deals over $50 million. Given rising cap rates and falling prices, the report recommends selling properties now while prices are still high and repurchasing when cap rates reach 10% and opportunities emerge.

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SPECIAL REPORT BULLETIN What’s Trading March 17, 2009
Deals priced at
up to $10M are selling provided
that the assets are priced
properly.
In terms of
Buyer Composition, it is again
the Private Investor who leads
the way, accounting for the
overwhelming majority of
acquisitions. No Company is
better positioned to access this
pool of buyers than SVN.
First, an update on cap rates/pricing:
Cap rates for all core products currently average 7.3%, which is a Take-Aways:
level that we have not seen since February, 2005. The trend,
especially over the last 4 months, shows that cap rates are 1. “Sell Now-Buy
increasing by approximately 15 bps/mo., which means that we Later” – Cap rates are going up,
will see 9 caps in one year, assuming that the cap increase prices are falling fast. One
remains constant, which it will not. RCA predicts that cap rates, school of thought suggests that
you should liquidate now and
which are currently increasing at a 2% rate of change per month,
approach the 10-cap market
will increase at greater rates, especially in the coming months. 10
with cash, ready to capitalize on
Caps are coming, perhaps in 2009.
the opportunities that the
market will present
What’s Trading by Price Point: later. Many sellers are doing
this and according to RCA,
It is no surprise that Sales Volume of deals priced at greater than
make up a large portion of the
$50M, and the Mega Deals ($100M+) are off precipitously, with
trading volume.
total volume falling by 80% & 95% respectively. Sales Volume for
Owners with
deals valued at up to $10M is off by only 44% over the prior
debt coming due over the next
year. Yes, “only.” The number of transactions in this category is
24 months should especially
off by only 37%, which is great news in the context of the percent consider this alternative to
change that applies to the larger deals. holding.
.
Caps and Spreads, All Core Assets
J 08 F M A M J J A S O N D
3.51 3.88 3.53
3.74 3.74 3.68 4.10 4.01 3.89 3.69 3.81 2.42
10 yr
6.64 6.70 6.74 6.79 6.83
6.79
6.57 6.76 6.75 6.81 7.00 7.14
cap
286 310 302
278 292 472
283 290 319 308 265 347
spread
For more detail contact:
Jeff Mullis, CCIM
(704) 759-3800 ext. 30
jeff.mullis@svn.com