Only 84 Investment Deals Expected This Year

DENVER-Patrick Devereaux, an associate director at Cushman & Wakefield and a top investment broker, is predicting only 84 investment properties will sell this year for this market.

He defines investment properties as office, retail and industrial structures that sell for at least $1 million and are at least 30,000-sf in size. The tally does not include apartments or vacant land.

If he is correct, it will be the lowest number of sales in recent memory and the first time in a dozen years that fewer than 99 properties sold. Indeed, in 1991, 99 properties sold. Last year, 103 properties closed.

Despite the drop in the number of sales, the average price is on the rise, Devereaux notes. This year, he expects the sales volume to hit $1.22 billion, the highest amount since $1.32 billion sold in 1999. In other words, despite an 18% drop in the number of properties sold, the sales volume is up 41%.

The sales volume will break down to 35 offices selling, compared with 36 last year; 25 retail properties, almost a 50% drop from the 48 that sold in 2002; and 24 industrial properties, compared with 19 last year.

Devereaux predicts that real estate will continue to be a preferred investment in 2004. “There’s an oversupply of capital for specific transaction types,” Devereaux tells GlobeSt.com. For a well-located, grocery anchored retail center, it’s not uncommon to receive 15 to 20 offers in the first 30 days, he says. “Bidding wars for core assets will continue,” he says.

One interesting trend has been that cap rates and market fundamentals have been out of synch. In a bad economy such as Denver’s, one would think that yields would be up and prices down for commercial real estate, but that has not been the case for well-leased properties with credit-worthy tenants, or grocery-anchored retail, he says.

In these days of low interest rates, a low yield on commercial real estate is considered extremely safe and attractive, he notes. “Ten-year bond rates will continue to fluctuate, but the prime rate will remain the same,” he expects for the coming year. Devereaux predicts there will be more than 100 investment sales in 2004. There also will be more foreclosures next year than this year, he says.