About 83% of the commercial real estate transactions in the works Sept. 11 went through as planned, a report found, a sign that the terrorist attacks hurt sales less than expected.
Of 500 sales in escrow across the U.S., about 12% were canceled and 5% were renegotiated as of Oct. 18, the survey by CB Richard Ellis Inc. found. Hotel sales had the highest cancellation rate, at 75%, followed by industrial facilities, at 16%. The rate for offices was 15%.
"I would have expected a bigger fallout," said Doug Haney, president of CB's Valuation & Advisory Services. "Underwriting is getting more stringent, not directly related to the disaster, but it's a reflection of the marketplace in an overall downward economy."
Investment brokers gave a variety of reasons for cancellations, no different than what would have been expected before the attacks, the report said.
The dynamics of the marketplace, including unemployment and vacancy rates, were more of a factor than the attacks, Haney said. The U.S. office vacancy rate rose to 12.3%, its highest point since 1996, in the third quarter, according to Torto Wheaton Research. Centex Development Co., which buys, sells and develops commercial projects "stood back and waited for things to settle down," said Stephen Weinberg, president and chief executive.
"September and October came to a standstill. People were not doing anything," Weinberg said. "What drives the business is not catastrophic events, but basic activity in the economy--employment, interest rates."
The property type that was affected the most by Sept. 11 was hospitality. Nine of the dozen hotel sales in escrow were canceled and one was renegotiated, according to CB.
The industry is expected to see the worst demand in 33 years because of the attacks, which stoked fears of flying, according to a PricewaterhouseCoopers report. The consulting firm found the attacks may cause revenue to fall as much as 5%.
"We are definitely seeing some caution in the hotel sector," said Gregory Adair, a partner at Olympus.
Still, he said, some sales have resumed after a pause. Olympus was scheduled to close its purchase of the bankrupt 284-room Clarion Ventura Beach Hotel in Ventura on Sept. 24, Adair said.
After Olympus asked the Bankruptcy Court for an extension, the court canceled the contract to find other buyers. It later approached Olympus again with a 10% to 20% discount off the original price, and the deal this month, Adair said.
"We decided based on price we had to buy it," he said.