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NEW YORK CITY-Global property sales in the second quarter rebounded after five consecutive quarterly declines, Real Capital Analytics reported in August, and RCA founder Robert M. White, Jr. said Wednesday that the uptick in volume is continuing as the third quarter winds down. However, White told a NAIOP New York chapter audience Wednesday evening that the US recovery is lagging the global picture.

A case in point is sales in New York City. White said the city ranked at the top of the heap globally for 2007 and fell to second place behind Tokyo in 2008. Year-to-date, it’s in sixth place.

By contrast, London has vaulted into second place YTD on the basis of its sales performance over the past 60 days–even if that surge in volume has been due to deeply discounted pricing; IPD reports a 45% decline off the peak. “The bargain hunters are all over the UK,” White said.

He noted that the latest Moody’s/REAL Commercial Property Price Indices, which are derived from RCA data, showed that US prices have plummeted nearly 40% from the ’07 peak as of July. The July CPPI, released earlier this week, was down 5.1% from June after having declined by only 1% the prior month.

Overall US market transaction volume in July continued the pattern seen thus far in 2009. “The market has averaged about 375 sales per month for the seven months in 2009,” Nick Levidy, Moody’s managing director, says in a release. “Over the same time period in ’08, sales were averaging nearly 1,100 a month.”

In a Global Currents report issued late Wednesday afternoon, RCA notes that “a great deal of opportunistic capital” is being accumulated in hopes of taking advantage of these price drops in both the US and UK. However, the report says, “The expectation of high returns is not without risk, and these two property markets are considered among the most risky; the spread between property yields and risk-free rates has ballooned to 450 basis points, among the highest of the developed economies.”

One school of thought in favor of chasing after cut-rate assets, according to RCA, is that “these price discounts, well below replacement cost, offer little risk and greater upside as the market rebounds. This camp usually quotes current price as a percentage of a property’s prior value to demonstrate what a great deal they got.”

But although buying an asset for 30% to 50% of its prior value–such as Worldwide Plaza at 825 Eighth Ave., which traded earlier this year for just 34% of its ’07 valuation–may sound like smart shopping, “benchmarking against the past is not often a sound investment strategy,” according to RCA’s report. “Instead, investors should focus only on the future, and buy if the asset is not only cheap in absolute terms, but also as compared to the future risks involved.”

The report advises that while “huge price discounts” may seem alluring, “no matter how cheap an investment may appear, if prices don’t rise, investors don’t gain. With the US and UK economies still shedding jobs and with no solution to the debt problem in sight, it could be a long time before property prices head north again. When they do, the upward trajectory may not be very steep.”

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