Share
NAR Chief Economist Lawrence Yun sounded a downbeat note on the state of the commercial real estate market over the next few years in an address Friday afternoon at the 2009 REALTORS® Conference & Expo.
Yun said the most immediate problem for this sector is simple: There aren’t nearly enough buyers.
“Who is buying? The answer is no one,” he explained. “The level of transactions is way down. We’re looking at an almost 90 percent decline from peak to current levels.”
One particularly hard-hit area of commercial is the office sector: Vacancy rates are getting precariously close to 20 percent and sales volume has fallen as far as 93 percent from its peak just a few years ago.
The industrial part of commercial is also performing well below the norm, due in large part to warehouses, Yun said. There’s more space, but much less need for it. Rents fell more than 10 percent this year, and probably will again next year.
The prospects for retail and multifamily are somewhat better. Yun predicts that as housing prices rise, people will be more inclined to spend, which will benefit retail. In addition, young people and professionals who’ve fallen on hard times will be able to move out of their relatives’ households and into their own residences as the economy slowly recovers. This will boost both multifamily and housing, Yun said, but he added that the employment picture will have to improve first.
However, the overall commercial market will probably continue to move down—too many indicators point to more trouble. For instance, cap rates are starting to rise for the first time since the beginning of this decade. Issuance of commercial mortgage-backed securities (CMBS) actually fell to zero during a few recent months. Moreover, CMBS delinquency rates have skyrocketed over the past couple of years.
That isn’t even the worst part, though. The biggest concern in the coming years is defaults. Commercial real estate debt maturities will spike at $1.8 trillion in 2012, and much of that amount is comprised of poor-quality loans.
“The credit situation in the commercial market is very disconcerting,” Yun said. “On the residential side, there is more government backing. That’s not the case for commercial real estate. In commercial, there will be another letdown before things improve.”
However, he also expressed confidence that the federal government would try to prevent a large collapse in the commercial sector. The Federal Reserve and Treasury Department have extended the Term Asset-Backed Securities Loan Facility (TALF), a federal relief program intended to increase credit availability, through 2010.
Yun said he expected to see more relief efforts in the future.
“The policy makers clearly understand that commercial real estate is the next shoe to drop, so they’re looking at things they can do. That doesn’t mean they have the policy to implement yet,” he said.
—Brian Summerfield, REALTOR® magazine
yeah,The industrial part of commercial is also performing well below the norm, due in large part to warehouses,.
Dear Author sanfordmgmt.com !
Very valuable information
I am definitely bookmarking this page and sharing it with my friends.
Very outstanding website.
The information here is genuinely useful.
I will share it with my friends.
Cheers
I want to quote your post in my blog. It can?
And you et an account on Twitter?
This is some really information, I just completed my paper for class and wish i would had found this article sooner. You may have just made me a regular
Very nice Blog, I will tell my friends about it.
Thanks
This is a excellent web.
I’ve bookmarked this site and I will notify my pals about it.
Thankfully
This may be a wonderful website.
I have bookmarked this website and also I am going to inform my local freinds about this.
Gratitude
For those who care about booms and busts, and whether they are inevitable or preventable — which should be all of us — I suggest reading Mason Gaffney’s “The Great Crash of 2008″ and “How to Thaw Credit, Now and Forever.” He points out that Homer Hoyt’s “100 Years of Land Values in Chicago,” published in 1933, tracked the five cycles that had occurred during that interval, and found 20 elements which virtually always appeared; Gaffney has added a few more. He shows the algebra, which brings in expected land rent (a), the interest rate (i), the expected growth in land rent (g), and derives the value of land, (V). If investors expect “g” to rise, they’ll pay high prices for land. For V to level off, “g” must fall to zero, which causes V to fall. “There cannot be a ‘permanent high plateau’ of land or stock prices, if “high” means based on high values of “g”. ” Buildings do not appreciate. Let me repeat that. Buildings do not appreciate. They depreciate, no matter what nonsense we permit our tax assessors to put online. What rises in value is land. (And the assessors typically undervalue it by large margins. Buyers do not, and neither do sellers.) Speculators do not speculate on buildings. They speculate on locations.
Do you have copy writer for so good articles? If so please give me contacts, because this really rocks!
You have really great taste on catch article titles, even when you are not interested in this topic you push to read it
Anyhow retain up the very good do the job.
i truly adore your writing type, very useful,
don’t give up and keep creating due to the fact that it simply just good worth to read it,
excited to looked over much of your stories, have a pleasant day!
Super information,I have bookmarked this site to my seo list for future and will keep a eye on your other postings.
i without a doubt love your own posting style, very useful.
don’t quit and keep writing for the reason that it just simply very well worth to follow it,
excited to find out a lot more of your own content pieces, have a great day!
Normally I don’t post on too many blogs these days, but I wanted to let you know that your blog really forced me to do so! I love your website & your style of writing, please keep up the excellent work.
bless you, awesome website
the way to make blog posts who smash in people:
http://tinyurl.com/yfgdcb3