401 Edgewater Place in Wakefield, along with its sister property at 301 Edgewater Place, are among the few premier commercial buildings currently on the sales market in Massachusetts.

All of a sudden, it appears the cupboard is bare for the commercial real estate market.

In what is traditionally the busiest stretch of the year for commercial sales, there is a dearth of properties available entering the final month of 2001, with only a handful of office buildings and other assets on the trading block. While investor interest is unexpectedly robust, industry observers report that building owners are nowhere near as eager to sell, at least not in an environment where buyers appear to be expecting some level of discount due to the region’s mounting economic difficulties.

That’s definitely the case, Spaulding & Slye Colliers investment broker Michael Smith said last week. Sellers are concerned about perhaps tainting their property by rolling it out right now and finding out demand is not as much as they’d like.

In some instances, as in the case of Boston’s Lafayette Corporate Center and 343 Congress St., deals have been put out to bid and then pulled back when asking prices did not meet expectations. In about 50 percent of the negotiations, buyers have attempted to reprice their bids mid-stream, Smith estimated, making it harder to get the sale to the finish line.

I think there are buyers for most product out there, he said. The question is where they are relative to the value that the seller [perceives]. At times, he said, there might be a dispute as to what current market rents are, or a debate on the strength of a property’s tenant roster.

Because it is never in the seller’s best interest to have a deal fall apart, Smith and other brokers say the reaction appears to be a reluctance to place the property up for sale at all. In the last downturn during the early 1990s, distressed landlords were often forced to sell, but Cushman & Wakefield principal Edward C. Maher Jr. noted that is no longer true for most properties, with stronger equity positions and paying tenants helping to keep buildings afloat.

Factored in that equation is the record-low interest rates sparked by the federal government, offering owners the option of refinancing a property and waiting out the current economic storm.

Some people are taking a breather, said Maher. There’s no problem with the demand side of the scale. It’s all in the supply.

As part of the Investment Services Group at Trammell Crow, Maher helped trade more than $1 billion of commercial real estate in Massachusetts each of the past three years. The firm also was busy at the opening of 2001, selling such high-profile Boston properties as One Federal St., 99 High St. and One Liberty Square.

All of that has changed in the past three months, however. At present, Maher said the investment group at Cushman & Wakefield has just two Boston properties up for sale, 18 Tremont St. near Government Center and 360 Newbury St. in the city’s Back Bay district.

It’s weird, said Maher. There’s a ton of money out there, but there’s just no place for it to go.

The building at 18 Tremont St., for example, received an amazing 55 registrations when it was put up for sale. Opportunity funds have been especially active, as are foreign investors who still seem to regard Boston as one of the top places in the United States to buy property. But the lack of assets, especially in the urban core, is making for slow going at the end of the year.

Whatever the reason, commercial property sales do appear to be down in Boston this year. According to real estate records, Boston and Cambridge had 30 office sales above $10 million in the first 10 months of 2000. For the same period in 2001, there have been just 22 such deals.

Both multifamily and industrial properties, the darlings of pension funds at present, are especially hard to find in Massachusetts. Many pension funds are reluctant to invest in office space after having acquired substantial holdings in that sector in recent years. Other funds are out of the mix altogether because the collapse of the stock market has skewed their formula of capping their percentage of assets in real estate.

‘A Great Irony’
Even with some pension funds on the sidelines, however, Maher said the overriding tale at the moment is the lack of property. Buyers are almost cold-calling with capital, and that hasn’t happened in a long time he said. It’s a great irony of this market.

There have been a few suburban deals of note, including the acquisition of 5 Burlington Woods in Burlington by the New Boston Fund and the sale of One Research Drive in Westborough, a 280,000-square-foot office building that Spaulding & Slye Colliers brokered. It was purchased by Berkeley Investments.

Perhaps the most prominent deal at present can be found in Wakefield, where Cushman & Wakefield is marketing 301 and 401 Edgewater Place. Owned by Clarion, the Class A buildings total some 340,000 square feet of space and would certainly be considered investment-quality properties.

I think a lot of people are watching that, agreed Maher, who predicted it would receive strong investment interest. He declined to provide the asking price for the buildings, both of which opened in the late 1980s.

Overall, Smith said he is encouraged that interest among investors is still strong for the Bay State. Despite the substantial gap between bidding and asking prices, Smith noted that there are sales occurring, as witnessed by the One Research Drive transaction.

It’s real, Smith said of the bid/ask gap. But it just means that investment brokers have to be more creative and work harder to get deals done.