With sales dragging along at this slower pace, even those who have thus far this year been lenders and active buyers "are now opting to join the rest of the players on the sidelines," the RCA report states. That means that previous hopes for an active fourth quarter of sales have dimmed.

The slumping office sales reflect the general malaise that has overtaken sales in virtually all commercial property sectors. The slowing of sales, in turn, reflects what Boston-based Torto Wheaton Research described in a report last week as an economy in which consumers and businesses have become "frozen" with uncertainty.

Even with the sharp drop in total sales, Real Capital Analytics report, a number of significant assets continue to change hands in October. In West Conshohocken, PA, for example, a the 223,736-square-foot class A Five Tower office complex sold for $73 million in a deal between seller Five Tower Bridge Associates and Orange County, CA-based KBS Real Estate Investment Trust I. Other notable deals during the quarter included the $97.6 million sale of the 315,000-square-foot West Quest Technology Park in Linthicum Heights, MD, the $164.7 million sale of the 312,000-square-foot Marketplace Center in Boston and the $280 million sale of the 891,0900-square-foot Citigroup Center in Downtown Los Angeles.

The RCA report points out that, not only are office sales in general declining, but some types of properties that were once considered investor favorites are now out of favor or being viewed much more cautiously. Single-tenant properties, for example, "havetraditionally been considered a safe haven in past downturns," the report notes. In this downturn, however, "Determining who is a creditworthy tenant is treacherous in the current environment, and single-tenant investors are paying up only for the tenants they are most familiar with, such as the leading drug store chains," the report explains. Financial tenants that had been very desirable are now "shunned," it adds.

Despite the overall slump in office building sales, RCA and others that track the markets note that medical office is a niche that has outperformed the rest of the sector. RCA figures show that about $4.3 billion worth of medical office assets traded over thepast 12 months, including $3.3 billion for the first three quarters of this year. The medical office total is down about 13% from last year, but the overall office market, by contrast, has plunged 62% thus far this year in comparison with last year.

Along with the decline in total dollar volume of sales, prices are sliding as well. "As quickly as property prices rose when the space and capital markets were both positive, property prices could fall with equal force now that the space and capital markets are deteriorating," the report states. RCA forecasts that, if the decline in sales continues as expected, "It is now likely that office property sales in all of 2008 will not even exceed the volume recorded in just the first quarter of 2007."

Instant Insights /

Office Sales Volume Dips to Lowest Since 2004

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