U.S. commercial property deals may double this year as confidence builds among investors who believe those values will rebound, Bloomberg News reported. Blackstone Group’s planned $9.4 billion purchase of U.S. shopping centers and Ventas’ proposed $5.7 billion buyout of a healthcare real estate investment trust may be a sign that a wave of commercial real estate acquisitions is coming as buyers regain confidence in the market. “Both these deals are a great signal that liquidity has returned to the commercial real estate space,” Dan Fasulo, managing director of Real Capital Analytics, said. “It certainly will have ripple effects on the entire industry.” Transactions surged over the past year as the economy began to recover and low interest rates made it cheaper for REITs and private equity buyers to acquire properties. Completed acquisitions by U.S. REITs more than tripled to $24 billion in the 12 months through the end of February compared with the previous year, according to data compiled by Bloomberg. Fasulo said he “wouldn’t be surprised” if U.S. commercial property purchases double in 2011 from almost $140 billion in 2010. [Bloomberg]

The U.S. commercial property market is on the upswing after a predicted collapse that never quite happened. According to Bloomberg News, commercial properties sold by institutional investors last year rose in price by 19 percent, which, according to the MIT Center for Real Estate, is the second-largest price gain ever for those types of sales. Meanwhile, Real Capital Analytics recorded investments in office properties last year at $41.6 billion, more than double what was invested in that sector in 2009, and the commercial mortgage-backed securities market is also beginning to rebound. Jones Lang LaSalle predicted that commercial real estate deals overall may rise 40 percent in 2011, to a volume of $135 billion. Buoyed by a rise in commercial property prices, lenders have finally begun to unload distressed assets from their balance sheets. “Give a little credit to the strategy put forward by the government: keeping interest rates low and giving lenders some flexibility to hold these troubled assets on their books for a while,” Dan Fasulo, RCA’s managing director, said. “Now that values are on the upswing, it’s given owners and lenders more wiggle room to work out these troubled situations.” [Bloomberg]

From left: New York City and Miami skylines

Distressed commercial real estate properties nationwide now total a record $180 billion, a new report by real estate research firm Real Capital Analytics reveals. As of November, Las Vegas was by far the worst off, according to the report, with $17.7 billion worth of properties that could be classified as distressed, which includes those in default, or that are delinquent, bankrupt or foreclosed upon. Manhattan ranked second on the firm’s list of highest dollar value in distressed assets: $12.3 billion. Miami trailed with $7.6 billion. Nationwide, the retail sector had the greatest share of distressed properties, with $37.5 billion. Hotels fared second worst with $32 billion worth of properties in distress. Offices came in third at $28.2 billion and apartments fourth, at $27.9 billion. The industrial sector, which, according to Dan Fasulo, a managing director at RCA, was never over-leveraged in the way other property types were, is suffering least. Just $5 billion worth of industrial properties are classified as distressed, according to the firm. Fasulo said the trouble in commercial real estate began only after the Lehman Brothers collapse. “Before 2008 there was no material distress in commercial real estate — period. It was just a normal market. This isn’t something you can compare with other periods. This is new for everybody.”

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Commercial property sales in the U.S. this year are likely to fall to
their lowest level in 18 years, according to research firm Real Capital
Analytics. About $16 billion worth of commercial transactions will
occur this year, the lowest volume since at least 1991, said Dan
Fasulo, managing director at Real Capital Analytics, and Sam Chandan,
chief economist of Real Estate Econometrics. The commercial mortgage
default rate more than doubled in the second quarter, hitting 2.88
percent, and could hit 4.1 percent, the highest level since 1993, by the
end of this year. [more]