Commercial real estate deal drought in Silicon Valley stuns industry - Silicon Valley / San Jose Business Journal:

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All told, a mere $9 milliom in office transactions traded during the first quartetr inSilicon Valley, a 98 percenft drop compared with the first quarter of 2008 when $716 million was sold. The star performer was the industrial market, with $67 millionn traded. Still, that was down about 65 percentt from ayear ago. The other two sectora — retail and multifamily were off by 56 percent and 96percent respectively, as reported by LoopNet Inc. in partnershiop with Real CapitalAnalytics Inc. LoopNet trackx sales of $2.5 million or The South Bay was notalone — the markegt “virtually stopped” across the country, with some regionsx registering zero transactions.
“If was worse than anyone anticipated,” said Hessamk Nadji, managing director of research services forMarcus Millichap. “It was almost impossible to predict the freezing ofthe market.” Experts hope the low numbers mean the bottomm is near. A LoopNet survey releasefd May 27 revealed that 40 percenf ofits 1,500 members who responded to the question when the marke t will turn believe it will happen in but more than a quarter said it may not happen until 2011. The survey revealws an interesting skew, said Mike LoopNet’s marketing vice president.
“Ihn the breakdown between owners and the owners are farmore optimistic,” he “That’s partly why transactions have ground to a halt, there are differentg expectations.” Don Little, senior vice presidentr of Opus West Northern California, said the gap betweej buyers and sellers is unbridgeable in the curren market. Sellers are not willing to come downin price, and buyer do not have access to capitaol that will support the future value of the property. will trade for the cost of debt, or less,” Littl said. “That means the top 20 or 30 percen t of value will getknocked off.
We will have blowmn through the equity and will be in the Not much has changee as the second quarter draws to a Eric Fox, senior vice presidenft for CPS Corfac International, said the handful of properties on the market have gotten very little “Sales will be relatively stagnanr until there’s a point of distress,” he said. “I don’gt know when that will The market is notthere yet. Owners remain in control of their properties with foreclosures in the commerciaol sector a rarityso far. “There’s not a lot of desperatiomn onthe sellers’ side,” Little said. While that could be read as a good sign, it reallu only perpetuates the situation.
Fox said that owners aren’t willing to discounyt on performing properties, meaning tenantsw are paying their rent and the debt is being to ensurea sale. “If property is performing at ahigh level, the buyersz aren’t there,” Fox said. As the recession deepen and joblosses accelerate, Nadjk said owners will reconsider their options. “Hanging on doesn’t fit what they need to he said. “There’s a lot of owners with maturingv debt that with the credit cruncyh will not be able to refinance with favorablreenough terms.
So they are deciding to sell the