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NEW YORK CITY-US markets saw some $2.1 billion in new industrial property sales listings in April, but sales totaled a mere $266 million, according to a new report from Real Capital Analytics. The approximately 8 to 1 ratio of new listings to sales is even higher than the 6 to 1 figure for the entire January through April period, indicating the sector is witnessing a precarious build-up of for-sale inventory that could have a dramatic impact on pricing.

Given that owners that don’t need to sell would typically not bring assets to market under current conditions, unless they felt they had no choice, Real Capital Analysts believes the growing imbalance may reflect an increase in the number of potentially distressed properties. The industrial sector currently accounts for the lowest volume of distressed properties among all major property sectors, with only $2.4 billion of assets in distress compared to $30.6 billion for retail, $17.9 billion for office, $18.7 billion for multifamily, $13.1 billion for development site and $11.3 billion for hotel.

But more than half the industrial amount, or $1.3 billion, has been added since January, suggesting the financial problems that beset the other sectors have begun to catch up with industrial as well. The report says the mountain of unsold property is almost certain to boost distress levels dramatically. The manufacturing sector is facing the lowest amount of trouble so far, while flex assets are seeing slightly higher incidents of default compared to warehouse properties. Real Capital says the chances of improved sales appear to be hampered by sellers’ reluctance to lower prices.

Significantly, though investors accounted for two-thirds of April acquisitions, half the deals involved long-term single-tenant purchases, where buyers forfeit prospects of high yields in favor of low risk. User-occupiers accounted for the remaining third. The latter percentage is higher than usual, but the volume of user-occupier sales is not, making it unclear whether this group will be able to make up for some of the loss of investor interest. Falling prices typically bring more user-occupiers into the market, but with their businesses hit by the same forces slamming the rest of the economy, fewer of them will be in a position to take advantage of the opportunity.

Real Capital expects the eventual sale of a 33-million-square-foot ProLogis portfolio to create a sales volume boost for the industrial sector in coming months. The Denver-based REIT had approximately $600 million of the portfolio under contract at the end of Q1 and expects to close in stages throughout the year. The portfolio has an estimated total value of $1.3 billion. On the other hand, the ProLogis disposition could divert investment from other properties, leaving the sales-new listings just as lopsided as it is now.

In other findings, Real Capital reports that cap rates for warehouse and flex properties rose 150 basis points in the past six months, while caps for single-tenant assets rose 125 basis points. Though the former typically move parallel to caps for suburban office properties, they are now about 50 basis points above them. Industrial cap rates are converging near 8%, which offers little-to-no spread above prevailing mortgage rates.

Regionally, says Real Capital, no region has been spared. Volume in every region has plummeted on both a year-over-year and quarterly basis. The Southeast was hit hardest, with year-over-year volume down 89% and quarterly volume down 83%. The Northeast saw the lowest drop in quarterly sales volume at “only” 59%.

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