Developed countries see commercial property sales plummet

Global sales of commercial property fell by 49% in the first half of this year as sales in developed countries were hit hard by the credit crunch, according to a new report.

Slowing economies added to the plummet which saw sales fall to $306 billion, said the report from Real Capital Analytics which tracks major transactions around the world.

But it was good news for emerging countries with Brazil, Russia, India and China gaining. Overall emerging markets accounted for 25% of all property sales, up from 10% in the first half of 2007.

And Japan is also defying the general downward trend. For the first time Tokyo overtook New York and London with sales of office buildings jumping 103% to $12.6 billion.

Development sites were the only type of property to see a rise in sales, up 11% and led by a record $2.3 billion paid for Chelsea Barracks in London.

'However, with new developments in Europe being delayed and new regulations limiting land sales in China, this sector may soon experience the same declining investment other property types have,' the report said.

Overall office sales were down 60% in the first half of the year versus a year ago, and sales of hotels were down 68%. Shopping centre sales were down 54% in the first half of 2008. Industrial property, comprised of warehouse and distribution centres, fell 38% and apartment building sales were down 34%.

Out of 84 countries surveyed 35 had higher property sales and all but five were emerging economies. In India sales doubled, in Brazil they rose 40%, Russia saw sales rise 19%, while China's previous robust commercial sector growth slowed to 7%.

Among developed countries, US sales dropped 63%, UK sales were down 57% and Germany slid 65%.

'Banks are all looking to raise capital and many have identified real estate as a way to raise cash in an efficient manner,' said Dan Fasulo, managing director and head of research at the New York-based research firm.

'From the buyer's perspective, sale and leaseback arrangements with large corporate tenants offer returns with relatively low risk,' he added. 'Institutions find a long-term lease by a major tenant attractive in this environment. Buyers have been looking for havens and these office properties can offer that.'