The real estate bubble has caught up with the commercial section, especially in industrial sales. According to Grubb & Ellis, a paltry $2.2 billion worth of industrial properties valued over $5 million sold in the first five months of 2009. Compared to historic figures, sales were down 81% from the same period in 2008. Distressed industrial properties also increased more rapidly than other segments in the first quarter accoring to Marcus & Millichap.
Cap rates are also going up. According to Grubb & Ellis’ calculation, the average cap rate is 8.1%, compared to 7.4% in 2008 and 6.9% in 2007.
Even though industrial properties only make up a small percentage of the total value of distressed US assets, the rate of increase has been dramatic (over 1% increase in the last year). As with the residential market, the increase in inventory has depressed prices. But even with the significant drop in prices, these properties aren’t selling. The decline isn’t that surprising, given the rates of unemployment across the US and the decline of sales overall in the retail sector.
While some experts blame the lack of financing, others feel that the state of the economy is to blame, thinking that investors are waiting until they feel the economy is really on the path to a recovery before committing their resources. Whatever the reason, it seems the commercial real estate market is in for a long haul.
Sources: Grubb & Ellis, GlobestCloak & Dagger the movie