Price Cuts on REO Properties for Sale to Lure Buyers
Efforts are made to entice buyers to the commercial real estate market, including reducing sale prices of REO properties for sale. However, Real Capital Analytics reported that sales of commercial properties, such as retail parks and office buildings, remained in place despite the significant price cuts.
Market data showed that out of 185 REO properties for sale, only about 53 sales for a total of $17.7 billion were completed since last year.
And the worst sales rate was posted in retail wherein only 13 out of the 71 properties on sale were escrowed for an estimated $143 million or $198-per-square-foot.
Meanwhile, hotel sales provided a positive note on an otherwise lackluster commercial real estate market, with 13 properties out of 16 sold since last year or an average price of $256,854 per-square-foot. The total sales volume for the whole deal was estimated at $17.2 billion.
On the other hand, disappointing sales were posted at the office and industrial building market, with only nine properties sold out of 29 REO properties for sale, for an average price of $227,000 per square-foot. Additionally, eight out of the 38 industrial buildings on the market have been sold with an average price of $109 per-square-foot.
Most potential buyers are adopting a wait-and-see-attitude when it comes to purchasing commercial real estate properties. They prefer to wait for the market prices to drop before jumping into the bandwagon.
Industry experts are expecting sharp decline in prices once a flood of commercial foreclosures are release on the market in the months to come.
The hesitancy of prospective buyers to jump into the current commercial real estate market is evident in the case of the 5.3-acre former Klondike Casino property in Las Vegas, Nevada. The property was initially offered on the market for $8 million. However, lack of interested buyers forced owners to remove the price and to consider all sales offers.
Restrepo Consulting Group consultant John Restrepo pointed out that some buyers purchased commercial properties before they go into foreclosures for just 40 centavos on the dollar or much less.
Many commercial properties across the country are on the precipice of becoming REO properties for sale because of the worsening economy which resulted to decline in rents and values, indicating that they are worth more than their total debt.
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