Commercial real estate sales dive in first half of 2008
By John Rebchook, Rocky Mountain News (Contact)
Published July 2, 2008 at 11:01 p.m.
Investors paid a little more than $1 billion for commercial properties in the Denver area in the first half of the year, a 62 percent drop from the $2.7 billion in sales in the first six months of 2007, according to a report released on Wednesday.
Cushman & Wakefield broker Patrick Devereaux, who compiled the report, and fellow broker Gene Pride, project about $2.05 billion in sales this year, compared with $4.1 billion last year.
A number of trophy downtown buildings are on the market, including the World Trade Center, 17th Street Plaza and 1801 California, which will boost this year's sales tally, Devereaux said.
The two biggest sales this year - the $94.5 million that Gart Properties and ING Clarion paid for the Denver Pavilions, and the $84 million USAA Real Estate paid for the Denver Financial Center downtown - accounted for almost 18 percent of the total dollar volume.
Overall, the Denver-area commercial real estate market remains strong, but is slowing, Devereaux said.
"Fundamentals of commercial real estate (in the Denver area) remain strong," especially when compared with most markets in the country, which boomed and are now settling down, Devereaux said.
Office lease rates, for example, are still rising, but not as much as they did in 2007.
Downtown office lease rates rose 8 percent in the first half of the year, compared with about 25 percent in 2007 from 2006, he said.
"Downtown continues to outperform the suburban market," Devereaux said. Downtown's office vacancy rate is about 9.5 percent, compared with 12.4 percent for the southeast corridor, he said.
If the national economy heads into a recession, or suffers a major downturn, Denver should weather it better than than most cities, Devereaux said.
The Denver office market didn't go through the wave of overbuilding of many other cities, keeping a lid on supply, he said.
Brad Neiman, an executive of Denver-based Fleisher Smyth Brokaw, who tracked the Denver market for about three decades, said it likely will take the rest of this year and all of 2009 for the commercial real estate market to work through all of the problems, such as the worldwide collapse of capital markets.
"Every product type has a question mark attached to it," Neiman said. "Investors are pricing the risk into offers they are making and there is a significant gap between what investors are willing to pay and what sellers think their properties are worth."
Biggest year-to-date sales
Property / Price / Buyer
Denver Pavilions / $94.5 million / Gart Properties
Denver Financial Center / $84 million / USAA Real Estate
Tamarac Plaza I, II & III / $40.85 million / Parmenter Realty
Signature Centre / $37.2 million / Real Estate Capital Partners
Citadel / $31.75 million / KBS
Number of properties on the market*
Type / July 2008 / July 2007
Office / 23 / 29
Industrial / 2 / 7
Retail / 14 / 27
rebchookj@RockyMountainNews.com or 303-954-5207
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7:02 a.m.
Suggest removal
WarrenJimmyBuffett writes:
"If the national economy heads into a recession, or suffers a major downturn, Denver should weather it better than than most cities," Devereaux said.
Hello, Mr. Devereaux we are in a recession right now. It will be a deep, ugly recession, and Denver will weather it like the rest of the nation. Commercial real estate will get hammered.