Commercial Real Estate Tornado hit Texas

Commercial real estate values are continuing their downward spiral, dropping 8.6 percent in April, according to a report released Wednesday by Moody's Investors Services and Real Estate Analytics.

That's the largest one-month nationwide decline on record. And the Southern region of the U.S., which includes Texas, is seeing the worst declines. Prices for investment properties in the Southern sector of the country are off more than 20 percent in the last year, Moody's researchers said.

U.S. commercial real estate values are down 29.5 percent from their peak in late 2007. "The question is will this mark the bottom or not," said Neal Elkin of Real Estate Analytics.
The biggest declines have come in the office sector, where prices are down about 29 percent nationwide from a year ago. And shopping center values have fallen 18.5 percent.
Another recent commercial property report predicts that the Dallas area will have the largest decline in office prices in the country during the coming year. That forecast last week by PricewaterhouseCoopers predicts that the commercial real estate market won't begin to recover until 2011.

Some industry watchers are even more pessimistic. The top analyst for Deutsche Bank's Commercial Mortgage Backed Securities operation predicted last week that the U.S. property market won't recover until 2017. "We are currently in something which is comparable to what we saw in the 1990s and potentially worse," Richard Parkus said at a New York real estate summit sponsored by the Reuters news agency. By STEVE BROWN / The Dallas Morning News stevebrown@dallasnews.com


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S&P's commercial real estate revolt

NEW YORK (Fortune) -- Despite near universal criticism of their many missteps during the credit bubble, the ratings agencies aren't irrelevant just yet.
Commercial real estate investors discovered as much last week, when an announcement by Standard & Poor's doused the spring rally in the beaten-down market for commercial mortgage-backed securities, or CMBS.

S&P's move left commercial property investors scratching their heads over the ratings agency's timing. The proposal, in which S&P warned it may soon downgrade hundreds of recent bond issues, could complicate a new federal plan to make financing more available for office buildings, apartment complexes and shopping malls.

Investors also wondered about S&P's change in tone on the prospects for the senior-most commercial real estate-backed debt securities. The ratings agency and its rivals Moody's (MCO) and Fitch have been under fire in Congress for their failure to alert investors to the housing bubble, and some observers wonder if they aren't hastily trying to make amends.
"They've spent 18 months getting raked over the coals for being too lenient, and now they appear to be oversteering," said Steve Jernigan, a director at NewOak Capital, an advisory, asset management and capital markets firm in New York.

S&P says politics aren't influencing ratings actions. "Our ratings are driven only by our best analytical judgment of the creditworthiness of the issuers and securities we rate and are formed independent of other concerns," spokesman Ed Sweeney said in an email. He added that S&P's comments last week reflect its "careful review and analysis of the current CMBS market and our expectations for it going forward." ~ By Colin Barr, senior writer at Fortune.com


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Lately, there has been a wealth of information concerning the health and state of the Commercial Real Estate industry and the article posted today is no different, but at SpacePlace.net, we feel it is vitally important that our members are kept up to date with the most current information available. We promise not every post will be about the impending doom of CRE, but enlight of all the new information, we feel it is critical to our members to share what others around the country are saying. Check out the latest article below!

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Even if rents and vacancies don't totally collapse, the commercial real estate market may be in for violent upheaval, if only because there isn't enough available credit to deal with all the re-financings. The New York Post runs down some of the grim numbers: At the center of the worries is some $3.5 trillion in debt backed by everything from strip malls to offices and apartments across the nation -- the lion's share of which is badly underwater because this recession followed a five-year commercial property boom fueled by easy money and loose underwriting standards.

Now the owners of the less-than-full malls, apartment complexes and office buildings are succumbing to the worst economic collapse since the Great Depression -- because they can't refinance the debt. The commercial debt securitization market is dead. "Because there is no securitization the system cannot process the wave of maturities coming due," said Scott Latham, commercial property broker at Cushman & Wakefield.

"This is arguably the most important fact we're going to be dealing with. If there's no mortgage market that can feed the machine you're just not going to have deals," he said. "It's going to be years before we recover and even when that happens we're going to discover that we're in a new paradigm," Latham added.

About $1.4 trillion in real estate debt is set to mature over the next four years, with some $204 billion coming due this year alone. From what we've heard, it's impossible to overstate how stingy commercial real estate lenders have become. Even projects with very solid tenants and no indication of a drop-off are having a hard time rolling over their debt. Still, there's a difference between a homeowner going into foreclosure and a commercial real estate owner that still has paying tenants. Whoever receives the property will still be seeing cash flow, and there's a good chance it will have some value, rather than some house in the middle of nowhere, with no prospects of being sold, whose only realistic fate is a bulldozer. ~ By Joe Weisenthal of Clusterstock.


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The Wobbly Skyscraper

Loan defaults in the worst commercial real estate market in decades have created tens of billions worth of distressed properties across the United States, sometimes forcing cut-rate auctions of landmark skyscrapers. Developers are falling behind on mortgages as tenants leave and can find no financing to cover payments.

So they are selling skyscrapers at a drastic discount, with the condition that the new buyer take on the enormous amounts of debt connected to the properties. "Just imagine in a residential market, if there weren’t 80 per cent loans available for everyone. If everyone had to buy their houses in cash, the values of houses would plummet everywhere," said Dan Fasulo, a managing director at Real Capital Analytics. "That’s happening on a massive scale on the commercial side." The Hancock Tower and the Sixth Avenue building are the first of a wave of foreclosures and auctions expected in the next year that will slash sale values of formerly prime real estate.

"This is a train wreck that’s coming in the large office towers," said Matthew Haines, chairman of the Propertyshark.com real estate website.

Real Capital Analytics, which tracks commercial real estate transactions, counted over $86 billion worth of distressed properties in the country as of April, over $6 billion in Manhattan.
Many of the towers that are likely to go up for sale were bought at inflated prices during the boom three to five years ago and could lose over half their value at sale.

The MIT Centre for Real Estate said last week that commercial property sales in the first quarter fell by six per cent from the end of last year, and were down 21 per cent down from the same period a year ago. And on Wednesday, the National Association of Realtors said its index of commercial brokerage activity fell almost 13 percent from a year ago.

Sales volume is "historically low. It has never been this low. It has never even been half this low," Geltner said (research director at MIT Centre of Real Estate).

The only major property sales that are likely in the next several months, analysts say, are distressed properties with delinquent loans.

"No healthy owner in their right mind would try to sell a property in this environment," said Fasulo. He said devalued sales of skyscrapers represent "a trickle right now. It will turn into a flood over the next 12 months." ~ By AMY WESTFELDT The Associated Press NEW YORK


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What is the state of the Commercial Real Estate industry ? When will the industry begin to recover? What is the formula for success? Top executives discuss these issues. Check out the link below!

http://link.brightcove.com/services/player/bcpid1847322079?bclid=4133070001&bctid=4051348001

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SpacePlace.net ~ The Commercial Real Estate industry's definative source for searching, listing and connecting to commercial real estate properties, professionals, and market information.

Commercial Real Estate In A Credit Crisis?

According to the Wall Street Journal, in a worst case scenario analysis, roughly $100 billion of losses could hit smaller banks by the end of next year. The root cause of which are commercial real estate loans.

Taking at look at 900 small to midsize banks across the US, the Wall Street Journal estimates that commercial real estate loans pose a massive threat to the banks' livelihood. Using a similar process that was used on the 19 'big banks' in the Federal government's stress tests, the Journal is seeing danger from the loans in the commercial real estate sector.

The study estimates a worst-case scenario in which unemployment hits 10.3%, which also means that banks would do better if unemployment topped out at a more manageable 8.9%. The contrast in the smaller banks losses to some of the larger banks the government is examining, has as much to do with investor interest as anything else. Some of the smaller banks, the Journal asserts, may not find the same kind of opportunistic investing when these smaller institutions run into trouble, meaning there is a likelier chance of those banks going under should the recession stretch on, which will further tighten lending markets.

Stay tuned for the latest in CRE market information!

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SpacePlace.net ~ The Commercial Real Estate industry's definative source for searching, listing and connecting to commercial real estate properties, professionals, and market information.

Commercial Real Estate Looking Gloomy

Delinquency rates and defaults on office and retail buildings and hotels have more than doubled in just six months. For apartments and industrial buildings, the rates have increased more than 80 percent, according to Reis Inc.

While homeowners are defaulting at almost four times the rate of commercial landlords, the sudden spike in late payments has many industry insiders worried about the collateral threat to the economy and financial system. Nearly $73 billion worth of commercial real estate loans are in some level of financial distress, according to Real Capital Analytics.

The good news is that SpacePlace.net is the new kid on the commercial real (CRE) estate block and has it's business eyes on helping brokers marketing budgets nationwide with their property listing needs.

Keep posted for more news coming soon!

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