Commercial properties.....the next real estate nightmare?

[marmar]

from MarketWatch:



A 'downer' for 2009
Commercial real estate is poised for worst year since 1992 recession
By Steve Kerch, MarketWatch


CHICAGO (MarketWatch) -- Commercial real estate is likely to suffer its worst year since the recession of 1991-1992, an annual study predicts, with property values falling, vacancies rising and developers forced to sit on the sidelines as capital remains scarce and debt markets struggle to right themselves from the credit crisis.

Although all commercial property types will be under pressure, moderately priced apartments and warehouse/industrial buildings will provide the best investment opportunity in the next 12 months, according to the 30th annual PricewaterhouseCoopers-Urban Land Institute "Emerging Trends in Real Estate" study released Tuesday.

"It's no surprise that 2009 will not be a good year for real estate development or investment. There is no escaping the minefield of the credit crisis and the broken financial system," said Stephen Blank, ULI's senior resident fellow for real estate finance. "And there is no quick fix."

Commercial real estate is only at the beginning of its correction, lagging behind housing and stocks, which have already been in a prolonged downturn, according to Blank and Jonathan Miller, partner in the communications firm Miller/Ryan LLC and author of the report. Property values are likely to fall 15% to 20% from their 2007 peaks, Blank said, before the bottom is reached in 2010.

"You're looking at an industrywide repricing of assets ... a dramatic drop in value and sharp increases in delinquencies and foreclosures," Blank said, although foreclosures and delinquencies will rise from what are record lows this year.

As a result, income for commercial-property owners will be under pressure and tenant demand is likely to decline for all categories except apartments, which could continue to benefit from the woes in the for-sale housing market, he said.

"The one saving grace for real estate is that development has been somewhat constrained, so overbuilding won't be the problem it was in previous downturns," Blank said. Developers, he said, "may as well head to the golf course next year" because there won't be money to build much of anything. .......(more)

The complete piece is at: http://www.marketwatch.com/news/story/Correction-commercial-real-estate-has/story.aspx?guid=%7B2ECE8F9C%2DCC9E%2D40D3%2DA390%2DFF557551FB3F%7D

[Aqaba]

1. Calculated Risk has been all over this for the past year at least

http://calculatedrisk.blogspot.com/">Calculated Risk

[Atman]

2. How did the Reagan years end?

With cities full of massive, empty skyscrapers. Commercial building went on a big boom and by the end of Reagan's term, almost every major metropolitan area was stuck with a sea of speculative commercial real estate that they couldn't rent for a dollar a sq ft. The Republicans love real estate because they can churn it and play games with the paperwork (which they control) and sell the rest of America on the "dream" of owning a home.

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