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The
Real
Estate Auction has come up in the world.
In the past, auctions were almost exclusively the last resort for
the desperate owners or banks eager to get a failed property off
their hands. Now an auction is one of the first options many
owners think of to sell commercial properties.
Sellers now include blue-chip companies and building owners under
no imminent financial pressure to sell. The range of buyers has
expanded to include more institutional investors and small
entrepreneurs with long-term goals, not just opportunists looking
for distressed property. And the properties, in many cases, are
well-leased office and apartment buildings, shopping centers and
hotels, in good condition.
'Five years ago, if we had two commercial real estate auctions a
year, that would be normal. Last year, we had 12 or 15' says Joe
R. Wilson, president of Wilson Auctioneers, Inc. of Hot Springs,
Ark., and chairman of the National Auctioneers Association, which
is based in Overland Park, Kan.
Other auctioneers across the country share similar experiences.
They say buyers and sellers like the speed of the auction process.
'Having liquid capital is so important to so many companies now.'
says John Dixon, president of Atlanta based auctioneer John Dixon
& Associates. 'The most important reason for selling at
auction is the fact you can sell it immediately and get cash in
hand.'
There are still reasons to sell commercial real estate the
old-fashioned way. For one, brokers cite privacy. The price of a
real estate transaction is less subject to broad scrutiny if a
sale is made traditionally rather than by auction. Also, brokers
say, selling real estate at auction can be more expensive because
the seller bears the cost of marketing and advertising of the
properties. Nonetheless, the popularity of auctions is growing.
Auctioneers say the properties seized from failed savings-and-loan
institutions by the governments Resolution Trust Corp. a decade
ago and sold at auction woke buyers and sellers up to the
opportunities auctions provide. There is also an eBay factor at
play, as Americans have grown more comfortable shopping for
virtually anything through auctions, largely because of the
success of the Internet auction site.
What's more, property owners who in the past may have hesitated to
go to auction, thinking they wouldn't get a good price, have been
inspired by the increased demand for real estate by investors
fleeing the stock market.
To be sure, auctions of foreclosed properties are still big
business. Indeed auctioneers are bracing for more distressed
properties to hit the block because of the weak economy. But they
see the non-distressed side of the business growing faster.
Overall, the dollar volume of commercial and residential real
estate auctions has risen about $2 billion a year for the past
three years, according to the National Association of Realtors,
with the bulk of the properties being commercial. Volume totaled
$54.5 billion in 2001 - about 6.5% of total real estate sales in
the US that year - up from $52 billion in 2000. Final figures for
2002 aren't available yet.
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