WORLD PROPERTY CHANNEL ®

(NEW YORK, NY) -- If you are a commercial real estate buyer, these are the best of times.  If you are a seller, these are the worst of times.  That's the gist of the first quarter 2009 PricewaterhouseCoopers Korpacz Real Estate Investor Survey just released.

"Although sales have been weak, investors surveyed by PricewaterhouseCoopers expect buying opportunities to emerge in the coming months as commercial loan defaults increase and the number of distressed assets on the market increases," says Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers..

"In fact, some investors are preparing for potential acquisitions by boosting their liquidity through de-leveraging, joint venture partnerships and select dispositions of current holdings," says Conlon.. "However, the bid-ask pricing gap remains wide between buyers and sellers, pricing is opaque because of limited sales activity and financing remains scarce."

Conlon says, "Tenants are in the driver's seat, and landlords are in survival mode, trying to preserve revenue streams in one of the harshest ownership environments ever encountered."

He adds, "It will be survival of the fittest going forward, with owners who are able to remain financially strong being better positioned to capitalize on the buying opportunities that are to come."

Susan M. Smith, editor-in-chief, PricewaterhouseCoopers Korpacz Real Estate Investor Survey, says, "Real estate investors do not expect a rebound in any of the commercial real estate sectors until well into 2010."

"In the meantime, property owners are faced with limited financing options, declining tenant demand, rising overall capitalization rates and deflated confidence. They are looking to protect the value of their existing properties in order to compete and survive in an increasingly challenging environment."

"To mitigate value loss, landlords are being more proactive about signing tenants to new leases, expansions and renewal, in some cases offering leasing incentives and lower rental rates. In addition, some are attempting to cut property costs and better position assets in a rapidly growing tenants' market."

Highlights of the survey:

Regional malls flatline - Sale transactions have nearly come to a standstill in the national regional mall market, with investors wary of performance and having trouble pricing assets. The average initial-year market rent change assumption dipped to 1.71 percent this quarter, 92 basis points lower than a year ago and the lowest average ever reported for this market.

Power centers struggle - With consumers curtailing spending, national power center property owners are struggling to maintain occupancy levels and rental rates. The overall cap rate increased by 41 basis points in the past quarter, to 7.98 percent, the second straight quarterly increase of at least 40 basis points.

Office markets crumbling - Demand has weakened for office space, and many traditionally strong markets are seeing vacancy increase. As supply outpaces demand, the average initial-year market rent change rate remains on a downward trend in the office sector, dropping roughly 260 basis points over the past year in the surveyed office markets. Furthermore, property values are expected to drop as much as 30 percent nationally over the next year in the CBD and suburban office markets. 

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