Why CRE Auctions Could Be the Fastest Path to Price Discovery

For decades, the conventional wisdom in U.S. commercial real estate has been that auctions are a last resort. A tool for distressed sellers. New research suggests the opposite: auctions may be the most accurate and timely measure of market value we have. A groundbreaking study by David Genesove from the Hebrew University of Jerusalem and James Hansen from the University of Melbourne, Auctions and Negotiations in Housing Price Dynamics, analyzed more than 20 years of housing transactions in Sydney and Melbourne. I spoke with David Genesove to learn why auctions act as such a strong leading indicator. The findings are clear:

Buyer-driven: Prices reflect real-time demand, not seller inertia.
Fast information uptake: Buyers adjust quickly to market changes.
Low momentum: Prices update immediately rather than drift over months.
Transparent and timely: Results are public and reported quickly.
Competitive pressure: Bidding compresses the gap between offer and true market value.

Why This Matters for U.S. Commercial Real Estate In CRE, where transactions are fewer and slower, the speed of price discovery is critical. A lag of even a quarter can mean millions in lost value for sellers or missed buying opportunities for
investors. Genesove and Hansen found that auction results reduced forecasting errors for negotiated sales by as much as 48%. In practice, this means that if you want to know where the market is going, you should watch the auction block, not the negotiation table.

The “Sluggish-Seller” One reason auctions are more predictive is that they are buyer-driven. Multiple bidders compete in real time, and seller expectations play a smaller role in the final price. In negotiated deals, seller expectations weigh equally with buyer sentiment, which slows adjustment to new realities. Real estate is not defined by one value—sellers have an idea of value that must be tested against the market. Genesove & Hansen coined the phrase “sluggish seller” to describe how sellers adjust price expectations slowly, often anchored to past values. This means negotiated deals lag behind actual market conditions, creating price momentum and delaying alignment with buyer sentiment. In the U.S. CRE market, the sluggish seller effect is magnified by:

Long-term leases and financing structures that keep sellers anchored to past income
streams.
Sellers holding out for “their number” even as asset value declines.
Asset management committees and boards delaying price adjustments.
Fewer direct market signals compared to the hyperactive residential sector.

Turning Auctions into Market Intelligence At Crexi Auctions, we see this dynamic every week. Auctions provide a transparent, competitive, and time-bound process that not only closes deals but also reveals where the market is truly pricing assets right now. In Australia, central bankers rely on auction data indices to inform policy decisions. Genesove is currently working on a new paper exploring how auctions can be used to predict market shocks.

The Bottom Line For U.S. CRE professionals—brokers, lenders, and investors—the lesson is clear: if you want faster, cleaner reads on market direction, start watching auction results. They may be the earliest, clearest signal you get before negotiated deals catch up.

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