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Entries Tagged as 'Commercial Real Estate'

Commercial Real Estate Crash Begins with Dubai

Dubai World's credit problems are not going to seriously affect the economy of the US, but are they a forewarning of things to come? We have been hearing about the coming Commercial Real Estate Crash in the US. Well, it has happened in Dubai where overbuilding has led to a glut of space and no money to pay the mortgages. While the government of Dubai could step in and take responsibility for the debt, it appears they are unwilling to do so.

What are the risks to the US economy?

From WSJ - The (US's) $3.4 trillion outstanding in debt backed by office buildings, shopping malls and other commercial real estate is easily large enough to pose a real threat to the recovery.

The Moody's/REAL Commercial Property Price Index has lost 43% of its value since peaking in 2007, recently falling to its lowest level since 2002. As commercial property values fall, debt defaults rise.

This problem has been well-telegraphed and will likely take a long time to unwind—through 2012, according to Guy LeBas, fixed-income strategist at Janney Capital Markets. That might lessen the impact on financial markets.

But much commercial real-estate debt is held by regional banks that aren't too big to fail and that, during this slow unwinding, might be hesitant to lend more money. That should, at the very least, keep the brakes on the economic recovery.

From Bizjournals - The commercial mortgage-backed securities market has collapsed – there has not been a single issuance since mid-2008. If this huge monster lumbers unchecked, it has the potential of massive portfolio destruction, devaluation and crumbled investor confidence in the capital markets, and in any hope for rebound of commercial real estate any time soon. Our industry agrees this must not happen and looks for the Fed to exhibit strength and competence in the form of meaningful legislative rescue driven by private sector ideas.

Let's hope we can all hang on for the ride.

Buying Office Space , Commercial Real Estate , Office Space , Office Vacancy Rate

Loopnet Q4 Poll Results: When will the Market Recover?

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Loopnet's recent poll mirrors what most of the commercial real estate pundits are saying that we won't see much improvement in the commercial real estate market until 2011. Commercial real estate almost always lags behind employment numbers.

"More than 1,000 LoopNet members completed our poll on the Q4 commercial real estate market. Sentiment has turned more pessimistic since the Q3 survey, with 46% of respondents expecting a rebound in transactions to wait until 2011 or beyond, compared to 1/3 in our last survey. Still, the glass half full view notes that over half are still expecting a 2010 recovery. Get more detailed results, including expectations for pricing and the major obstacles that are standing in the way of a recovery on our blog."

Also from their blog:
"Nearly 1 in 5 are expecting to wait until 2012 to see a recovery."

More information from a previous post.

 

Commercial Real Estate , Office Relocation , Office Space Negotiations