According to recent data from the Mortgage Bankers Association (MBA), the amount of commercial real estate sales dropped by a little more than half in the second quarter of 2023, compared to the same time last year. While up slightly from the first quarter, this still represents a serious decline in commercial real estate sales, as more companies give up their office space for work-from-home policies. Banks have also become more reluctant to lend money for purchasing offices, hindering those who still want to buy new office space for their companies.
Commercial Real Estate Sales Down by Half
According to the MBA, commercial real estate sales are down by 53% in Q2 of 2023, compared to the same period last year. While this is still up by 23% compared to the first quarter of 2023, it still indicates a dramatic drop in demand for office space. Vacancies also reached an all-time high, reaching 13.1% in the United States, according to the National Association of Realtors.
Problems With a Market “Logjam”
The MBA noted that there is currently a “logjam” in the commercial real estate market due to high interest rates, questions over property values, and other financial pressures. In particular, there are questions over how these properties might be sold, with more and more companies moving to work-from-home policies. While this current logjam may be temporary, it is clear there will need to be fundamental changes to the market to begin accelerated sales of commercial properties.
Lenders Grow Wary
However, that does not mean that lenders are happy with the current situation. There is about $1.5 trillion in commercial real estate debt on the market, and much of it is reaching maturity. If these debts cannot be refinanced, it could lead to a flood of properties entering onto the market at around the same time, driving prices down dramatically and leaving the market with far more properties than there are interested buyers.
How This Could Affect You
If you are a commercial real estate owner looking to sell your property, the current situation may seem somewhat difficult, as there are relatively few buyers and more people looking to sell. However, if you are an interested buyer, you will likely not find a better time to start looking for properties. With more and more companies looking to offload their offices, you may be able to get a very good deal on what would have previously been very pricey real estate.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
