Sales of small commercial buildings in the U.S. (ones with a price tag of $5 million or less) are on the rise, and have reached their highest level since 2008. Buyers are taking advantage of favourable prices, which have not yet fully recovered from the property crash, as well as increased access to financing to get deals finalised.
Increased demand for commercial properties would help to give some depth to a recovery which has been restricted to a narrow portion of the market which encompasses malls, apartments and trophy office towers. According to Trepp LLC, bank loans for properties with a value of $1 million or less account for approximately 33 per cent of commercial mortgages held by banks.
Sales volume for properties values at less than $5 million increased 41 per cent in May from the previous year to $4 billion. Of the 122 metropolitan areas Boxwood Means tracks monthly, 88 posted year-over-year increases. The total volume of sales for the period from January-May of 2012 was $20.3 billion, which is the highest amount for the period since 2008.
Local office buildings, restaurants and shopping centres have been slow to recover as the recession eased because they depend on local economies and the housing market to drive business. Prices for buildings of less than $5 million fell in May to a new low of 22 per cent, according to data collected by Boxwood Means.
According to New York-based bank and real estate data company Trepp, banks in the United States hold approximately $308 billion in commercial mortgages with balances under $1 million, which accounts for about 29 per cent of commercial property loans. Many of these types of mortgages are held by community banks, and loans for less than $1 million account for 40 per cent of commercial mortgages for banks which have less than $1 billion in assets.
