GUS FAUCHER is director of macroeconomics at Moody’s Economy.com
The global credit crunch and economic slowdown continued to chill sales in every sector of Greater Boston’s commercial real estate during the second quarter, according to a survey by Loop Net, an online listing service, and Real Capital Analytics, a global research firm.
Sales of office buildings plummeted to $470 million from April through June from $1.9 billion compared to the same period in 2007, a 76 percent decline. For the 12-month period ending in June, sales numbers fell a jaw dropping 80 percent to $3 billion from $15.4 billion. The region fared worse than the nation as U.S. office sales slipped 50 percent over the past year.
“It’s not that that Boston’s environment for office building sales is particularly bad, it’s a tight capital market, the financing is just not there,” said Gus Faucher, director of macroeconomics at Moody’s Economy.com, an independent provider of economic research. “Things are bad all over. Lenders are anxious and it’s difficult to get a deal financed.”
Economic uncertainty, hesitation by investors and a scarcity of financing has reduced sales across the board. In addition, a record share of banks tightened credit for all types of mortgage loans including commercial real estate in the second quarter and many plan to restrict lending well into 2009, according to a survey of senior loan officers by the Federal Reserve.
Sales of regional malls and neighborhood shopping centers also took dramatic hit. The retail sector saw sales in Greater Boston fall to $156 million in the second quarter, down from $626 million one year ago, a 75 percent decline. Nationally, retail center sales fell 44 percent to $46.9 billion for the 12 months that ended in June from $85.9 billion.
In the multifamily market, sales of Greater Boston apartment buildings fell to $154 million in the second quarter from $244 million for the same period one year ago, a 36.8 percent decline. The fall was in stark contrast to the national trend that saw sales of multifamily dwellings slip by 7 percent.
Warehouses did not fare much better. Second quarter sales in Greater Boston slipped to $80 million from $442 million one year ago, an 82 percent decline. In the 12 months that ended in June, warehouse sales fell modestly to $1.1 billion from $1.2 billion in the prior year, a 6 percent drop. In contrast, U.S. warehouse sales fell by 20 percent to $42 billion from $53 billion for the same period a year earlier.
While Economy.com’s Faucher is convinced that the financial markets should improve by next year, he expects the Boston area to lose about 1 percent of its workforce as employers do not fill vacancies and are cautious about expansion.
“We expect Boston’s office market to be soft next year because of falling employment,” he said. “So even when financing conditions improve, lenders may be reluctant to make deals because of concerns over where the office market is headed. We may not see improvements until 2010.”
