This article just recently appeared on Costar and seemed to be in line with what we saw here in the Bay Area over the latter part of 2012. Every year we see investors shuffle assets typically due to tax implications; however there were several issues at play this year when considering the hyped “Fiscal Cliff” and the reelection results.
CoStar Data Reflects Effort to Offload Properties By Sellers With The Highest Tax Exposure
Congress and President Obama weren’t the only entities negotiating through the holidays. A slew of large commercial real estate transactions closed in the run up to Jan. 1 as many sellers unloaded properties before the expiration of the Bush era tax rates, hoping to avert the prospect of higher capital gains taxes on property sales.
The volume of transactions entering the CoStar research pipeline, generally in line with the previous year during the first three quarters of 2012, exploded in the fourth quarter. Total deal leads were up 46% from the same time a year ago based on transaction data through Dec. 31, according to Brian Kerschner, real estate economist for Property and Portfolio Research (PPR), CoStar’s analytics and forecasting company.
The composition of those deals was also eye-opening. Transactions for lower-value deals — assets most likely to be sold by owners hoping to avoid the tax consequences of a sale — were up a striking 77% in the fourth quarter. Higher-value deals, typically executed by entities such as REITs and pension funds with less exposure to capital gains taxes, were up 34% from a year ago.