So the U.S. commercial real estate sector declined at the beginning of the year, according to the National Association of Realtors, which said on Wednesday its index of brokerage activity in the sector fell 4.8 percent in the first quarter from the fourth. Activity was also 12.9 percent below the first quarter of 2008, NAR said. "Significant job losses have reduced the demand for commercial space, while a lack of credit has stalled transactions and refinancing activity," said the association's chief economist, Lawrence Yun, in a statement.
Treasury Secretary Timothy Geithner said the keys are putting "more capital where it is necessary and getting the securities market back to the point where they can help refinance viable projects." The Federal Reserve has offered some relief by opening its $200 billion Term Asset Backed Securities Loan Facility to AAA-rated commercial mortgage-backed securities, he said. "The Fed announced yesterday a very important step that's going to extend this program to commercial mortgage-backed securities -- newly issued securities and legacy assets in that area," he said. "The market responded quite favorably because the availability of financing in those markets will help get those capital markets going again."
The NAR said commercial real estate activity, which encompasses the finished construction of buildings and their sale and leasing, will continue to decline for the next six to nine months. "Because commercial real estate always lags an overall economic recovery, it will take some time for the commercial real estate market to rebound," Yun also said. The association, which represents 1.2 million professionals in residential and commercial real estate, projected that vacancy rates in office buildings will reach 16.1 percent in 2009, up from 13.4 percent in 2008, and will rise again to 20.4 percent in 2010. Retail vacancy rates will likely increase to 12.1 percent in 2009 from 9.7 percent last year, and will spike to 15.8 percent next year, the association said.
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