Editor’s Note: Quite a gloomy outlook on the U.S. Commercial Real Estate Market. Commercial property values dropping by potentially 50% or more. With no recovery until 2017, that would be a protracted period of increased defaults on commercial loans. I am waiting for the official announcement of a bailout program targeted at refinancing commercial loan notes. Along with the Alt-A home loans resetting this year and 2010, we are going to see more commercial defaults as many of these notes have their interest rates rise at the Libor and different key bond issues these loans can be tied too. When the economy finally shows real signs of recovery, I don’t think the lending capacity will be back at the level it was during the boom years. That means without some sort of additional lending capacity, we will see many borrowers facing foreclosure on their commercial property.
News (Reuters):
The U.S. urban commercial real estate markets probably will not recover until 2017, the head analyst of commercial mortgages for Deutsche Bank Securities said on Monday.
“The froth is still working itself out,” Richard Parkus, Deutsche Bank head of Commercial Mortgage-backed Securities and Asset-Backed Securities Synthetics Research said at the Reuters Global Real Estate Summit in New York. “We are currently in something which is comparable to what we saw in the 1990s and potentially worse.”
U.S. commercial real estate values could fall by more than 50 percent from the peak in 2007, he said.
Although asking rents are down about 28 percent in New York, factoring in free rent and other perks by landlords, rents are down about 50 percent, Parkus said.
“Rents will be back to where they were in 2017,” Parkus said. Building prices also will take six to eight years to recover, he said.
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