Last week we pointed you to some analysis done by David Bodamer at Retail Traffic Magazine, which showed that a recent mall transaction valued the property as low as 50% below its 2007 peak. The Buffalo mall sale is just a single datapoint, but it gives a clue as to how bad the market is for commercial/retail property.
Well, Bodamer’s got more data on the Buffalo market, and it turns out his initial analysis may have been optimistic. That worst-case 50% decline may actually be more like 60%
I’ve gotten Real Capital Analytic’s data on Buffalo, which includes estimates on five of the properties that changed hands in 2004 and in 2009. RCA’s data puts the price paid in April 2004 at $96 per square foot per asset and puts the price on the current deal at $53 per square foot per asset. (One asset, however, shows up in RCA’s data in 2004 at $12 per square foot.) Moreover, one of properties in the Buffalo market that was originally part of the 2004 DDR deal traded in January 2007 at $131 per square foot. In June 2007, another property from the 2004 deal traded at $138 per square foot, according to RCA’s data. That was right during the stretch when the market peaked. However, two other properties from the 2004 portfolio also traded in June 2007, but only at $102 per square foot.
Put that all together and what do you get? The pricing drop from $96 per square foot to $53 per square foot represents a 45 per cent discount to the 2004 price. The discount to 2007 is somewhere between 45 per cent and 60 per cent, based on the 2007 prices.