The real estate world is familiar with a multitude of online residential real estate bidding sites, but one commercial real estate (CRE) auction site has gotten so big that it is turning away billions of dollars worth of properties. CoStar Group-owned Ten-X is the world's largest online commercial real estate exchange and has become pickier about the properties it attaches itself to — especially in a now tumultuous multifamily sector.
“Our highest volume as far as the number of deals is in retail. There’s a big disconnect right now for multifamily transactions regarding price,” Brandon Lewe, the vice president of sales for Ten-X, told Benzinga. “For us, a bad fit for our platform is when a client has an unrealistic expectation on price. This year we looked at and eventually turned away $4.2 billion of potential real estate deals. We provide the guidance, and sometimes both parties decide they’re too far apart and decide not to go forward, while sometimes the decision is mutual.”
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It’s no secret that 2023 multifamily investment has been a rough road with a lack of funding, higher payments and rising insurance costs. On top of that, rent increases are finally slowing. In its second Auction Insights Report, which releases data and CRE trends in the multifamily sector, Ten-X reported a decelerating national rent growth from 3.8% in 2022 to 2.6% in the first quarter of 2023. Even so, investor interest, according to Ten-X, is not waning. Site page views on Ten-X have increased by 46% since the first quarter of 2022.
“Multifamily has been propelled by tailwinds over the last few years, but external factors, such as continued interest rate hikes and reduced loan-to-value by lenders, have led to cap rate decompression and have prompted a reevaluation of the sector,” Ten-X President Steven Jacobs said. “What we’re seeing on Ten-X is not that investors are backing away from investing, but they are being more conservative.”
The Ten-X bidding site, purchased by CoStar for $190 million in 2020, generates revenue from a transaction fee paid for by the property buyer or investor. The fee is between 1% and 5%, depending on the property price. Brokers and sellers access the digital platform, easing the process of onboarding properties and following up on leads. Buyers are matched with properties aligned with their investment goals and objectives.
“It’s really a transaction platform where buyers and sellers come together. We’re helping provide the guidance needed on how to execute and maximize net profits,” Lewe said.
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