Editor’s Note: I’ll just take a quote from the article that sums up my opinion to this point on the commercial property market. It is from Dan Fasulo with Real Estate Econometrics, “There’s no real way to sugarcoat it,” Fasulo said in an interview. “A slowdown of this magnitude certainly hasn’t occurred since I’ve been in the business.” Personally I have a few friends in the commercial industry and they are all seeing numbers way off from even last year. Maybe we are seeing a recovery but for that to be confirmed, the jobless numbers need to come way down so that we can be confident that business are adding employees and hence more commercial space.
Bloomberg, New York - Commercial-property sales in the U.S. this year are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s.
About $16 billion of office transactions will be completed by year-end, according to data compiled by Real Capital Analytics Inc., a New York research firm that has tracked deals for almost a decade. Real Capital Managing Director Dan Fasulo and Sam Chandan, chief economist of Real Estate Econometrics LLC, said that may be the lowest volume since at least 1991.
“There’s no real way to sugarcoat it,” Fasulo said in an interview. “A slowdown of this magnitude certainly hasn’t occurred since I’ve been in the business.”
The financial crisis that led to the demise of Lehman Brothers Holdings Inc. and the buyout of Merrill Lynch & Co. is curtailing commercial property lending and leading more landlords to default on loans. The scarcity of transactions is making it difficult for buyers and sellers to value properties, further delaying any potential thaw.
The default rate on commercial mortgages held by U.S. banks more than doubled in the second quarter to 2.88 percent, according to New York-based Real Estate Econometrics. It may reach 4.1 percent by year end, the highest since 1993.
That may mean more pain for banks that hold the mortgages and signal that this year’s gain in real estate investment shares may be overdone.
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