Commercial foreclosures in Austin Texas soars 108% in 2009
2010 will be the year to watch in commercial real estate. With all the talk of full recovery in 2010, we still have a declining retail market, high unemployment and commercial loans coming due. If we can see the earnings come in where the market has priced them and jobs start getting created then maybe we will be in the clear.
But, with more debt and taxes set to be put into effect, we will see continued pressure on the U.S. consumer and that will most likely put a damper on companies plans for expansion and that will have a direct impact on the commercial real estate sector.
Hundreds of lay offs in the manufacturing industry in Austin this year are to blame for a 108-percent increase in the number of commercial foreclosures for 2009, the highest of any Texas city.
U.S. commercial real estate to bottom in 2010 according to survey?
Editor’s Note: This is the most optimistic survey so far on the U.S. commercial property market. We have seen an estimate as far as 2016 for a recovery. If we are looking at unemployment not peaking until “atleast” the second quarter of 2010 (I believe 2011 or 2012 to be realistic), I don’t see businesses going out and signing new leases for space or purchasing buildings when there is still so much uncertainty.
Our stock market has some quite robust growth rates (3-6%) priced in so until we see some real growth that is not supported by the government and the jobless numbers start coming down, in my opinion this survey is just painting a rosy picture that doesn’t have any meat behind it. Here was my favorite quote, For developers of new projects, the advice is blunt: Write off 2010, as well as 2011 and probably 2012. “You can close up shop, hit the links,” the report said. “Forget about construction financing — that’s a pipe dream.”
U.S. Commercial Real Estate Values Decline as Rents Fall
Editor’s Note: Well the commercial real estate crisis is growing and here is more evidence, that it is accelerating. We are just past the half way point and values have already decline 27% so far this year. Like many others have said, Moody’s said it is too early to forecast a bottom in the commercial real estate market, I agree. We need to see unemployment decline and foreclosures to decline so the residential properties are not dragging down commercial real estate.
News (Bloomberg):
Commercial real estate values in the U.S. fell 27 percent in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending.
U.S. commercial real estate index sets record decline with 18% drop
Editor’s Note: According to this index, the commercial market is down 22% YTD. This does not bode will for engineering any type of recovery. Our economy is built with many different piece that operate dependant and independent of each other. We are having a credit and confidence crisis and that affect all industries by making it tougher to borrow and interest rates are higher because of the increased uncertainty.
News (Reuters):
Despite a pick up in sales, commercial real estate prices posted a record drop in the second quarter, according to an index developed by the Massachusetts Institute of Technology Center for Real Estate.
With an 18.1 percent drop, the index, which tracks commercial property sold by major institutional investors, is now down 22 percent year-to-date, 32 percent from a year ago and down 39 percent from its mid-2007 peak, according to the report released on Monday.
U.S. lawmakers urge continued commercial property loan help
Editor’s Note: The calls for bailout in the commercial real estate market are growing daily. Many loans are coming due in a environment that is being increasingly difficult to refinance in. I predict this will increase through the fall and by then some sort of bill or policy will come into place. If not then you will see the commercial market implode and that will continue to drag down prices and that will have affects in other parts of the economy.
News (Reuters):
U.S. lawmakers on Friday urged the Treasury Department and the Federal Reserve to extend the duration of a commercial real estate lending support program, saying the sector is poised for a dangerous credit shortfall in the recession-mired economy.
$165 Billion in U.S. Commercial Loans Due in 2009
Editor’s Note: First American is a large title company that has various data services they provide for the real estate industry. With First American reporting that commercial rental rates are dropping, that means the Net Operating Income (NOI) on many of these maturing loans are going to be reduced. That means it could be problematic when you go to value the property to refinance and the it is valued less than the mortgage that is attached to it. Either the borrower will have to make up the difference or they will lose equity built up in the property when it gets finance at a lower value.
News (Bloomberg):
Almost $165 billion in U.S. commercial real estate loans will mature this year and need to be sold or refinanced as rents and occupancies fall, according to First American CoreLogic.