{"id":1004486965,"date":"2020-10-26T05:25:23","date_gmt":"2020-10-26T13:25:23","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004486965"},"modified":"2020-10-26T05:25:23","modified_gmt":"2020-10-26T13:25:23","slug":"cres-bid-ask-spread-widens-moodys","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/cres-bid-ask-spread-widens-moodys\/","title":{"rendered":"CRE’s Bid-Ask Spread Widens: Moody\u2019s"},"content":{"rendered":"
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Image via rawpixel.com<\/em><\/p><\/div>\n

A rise in cap rates will cause commercial real estate values to drop from 7 to 9 percent in the multifamily and industrial sectors and by 20 percent or more for office, retail and hospitality asset types, a new white paper from Moody\u2019s Analytics REIS predicts.<\/p>\n

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READ ALSO<\/strong>: CRE Transaction Activity Picks Up, NAIOP Reports<\/a><\/p>\n

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Going back to before the coronavirus upended life and business, Moody\u2019s notes in “COVID-19 and CRE Transaction Markets,” dry powder totaling hundreds of billions of dollars was waiting for the right commercial real estate deal<\/a>. <\/p>\n

And even this past spring, after it became clear that COVID-19 was no mere seasonal flu, Moody\u2019s points out there was much speculation that opportunistic funds were raising comparable amounts to jump on distressed deals.<\/p>\n

Yet despite all that, transaction volume fell roughly 40 percent year-over-year in the second quarter. And the Mortgage Bankers Association expects commercial mortgage origination to fall further.<\/p>\n

Bid, ask, stalemate<\/h2>\n

Moody\u2019s wrote, \u201cwe believe that the ongoing uncertainty fuels a bid-ask spread that remains wide.\u201d Potential commercial real estate buyers and sellers \u201chave significant differences of opinion on future rents, occupancies, business prospects, and, ultimately, expectations of net cash flow going forward. Owners prefer to value properties on pre-COVID-19 performance with little consideration of current capital market conditions, while opportunistic buyers tend to take the opposite view.\u201d<\/p>\n

Those opportunistic buyers, Moody\u2019s comments, \u201care likely seeking a haircut of approximately 30 percent before committing to a purchase.\u201d<\/p>\n

But consider the opposite side of the ledger: Moody\u2019s Commercial Property Price Index shows substantial declines, but\u2014with the notable exception of the retail sector, already in much stress before the pandemic\u2014these are substantially more moderate than those seen between 2008 and 2010.<\/p>\n

The white paper also points out that for the most part, commercial properties continue to generate revenue, on top of which occupancies \u201cwere holding steady at the national level as of the second quarter.\u201d Though asking and effective rents are seeing downward pressure, actual decreases have so far been very minor.<\/p>\n

So it\u2019s no mystery why the majority of owners don\u2019t see a rationale for selling at distressed prices.<\/p>\n

The white paper quotes Ryan Severino, chief economist at JLL: \u201cIt\u2019s a tale of two worlds right now: you\u2019ve got a national public health crisis putting downward pressure on hotel and retail asset prices. But even within those two sectors, you have high quality assets that are still posting steady if not increasing revenue metrics. It\u2019s no surprise therefore that a large enough number of buyers and sellers have yet to come to an agreement about pricing.\u201d<\/p>\n

Read the full report by Moody\u2019s Analytics REIS<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

As buyers and sellers approach deals from widely divergent valuation standpoints, transaction velocity is stalling.<\/p>\n","protected":false},"author":882,"featured_media":1004487208,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21808,45527,23891,21742],"tags":[48950,33034,34040,33556],"class_list":["post-1004486965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-keyword-optimized","category-national","category-latest","tag-coronavirus","tag-moodys","tag-mortgage-bankers-association","tag-ryan-severino"],"acf":[],"yoast_head":"\nCRE's Bid-Ask Spread Widens: Moody\u2019s - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/cres-bid-ask-spread-widens-moodys\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CRE's Bid-Ask Spread Widens: Moody\u2019s\" \/>\n<meta property=\"og:description\" content=\"As buyers and sellers approach deals from widely divergent valuation standpoints, transaction velocity is stalling.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/cres-bid-ask-spread-widens-moodys\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-26T13:25:23+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2020\/10\/image-from-rawpixel-id-2617356-jpeg.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"620\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Scott Baltic\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/cres-bid-ask-spread-widens-moodys\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/cres-bid-ask-spread-widens-moodys\/\",\"name\":\"CRE's Bid-Ask Spread Widens: Moody\u2019s - 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