An article last week in the LATimes noted that while prices are not exactly climbing, investors are “on the prowl again” and bidding is brisk for desirable commercial properties.
The report noted that there is a lot of commercial real estate investment money on the sidelines awaiting bargains that just haven’t materialized because lenders have been extending loans.
When attractive buildings become available, bidders are showing up. The Wilshire-Bundy Plaza, a preeminent Brentwood office building, drew 40 bidders and fetched $111 million. One CRE broker called that “an incredible price”.
The article also noted:
If the commercial real estate market continues to gain strength it would represent a significant shift in economic risk because many experts had feared that mass defaults by landlords on their loans could cripple banks and drive the country deeper into recession.
“It’s true that thousands of commercial loans must be worked out and some of these properties will enter the market in 2010,” investment banker David Rifkind said. But “federal policy has been accommodating to banks and they are not being forced to realize losses.”
“There is so much money sitting on the sidelines that when distressed assets or even small pools of loans come to market, there is a flood” of interest, said Rifkind, managing partner of George Smith Partners.
“That became palpable to us in the first quarter,” he said. “Money can’t stay on the sidelines for long periods of time. It has to retool and be put to use.”