Posted on 01/05/2009 7:35:52 AM PST by george76
Vacancy rates in office buildings exceed 10 percent in virtually every major city across the United States and are rising rapidly, a sign of economic distress that could lead to yet another wave of problems for the beleaguered financial sector.
With job cuts rampant and businesses retrenching, more empty space is expected from New York to Chicago to Los Angeles in the coming year. Rental income would then decline and property values would slide further. The Urban Land Institute predicts 2009 will be the worst year for the U.S. commercial real estate market "since the wrenching 1991-1992 industry depression."
Banks and other financial companies have not had the problems with commercial properties in this recession that they have had with residential properties. But many building owners, while struggling with more vacancies and less rental income, will need to refinance commercial mortgages in the coming year. The persistent chill in lending from banks to the credit markets will make that difficult - even for borrowers who are current on their payments - setting the stage for loan defaults.
The prospect bodes poorly for banks, along with pension funds, insurance companies, hedge funds and others holding the loans or pieces of them that were packaged and sold as securities.
the potential impact of defaults. "Each one by itself is not significant," ..."but the cumulative effect will put tremendous stress on the financial sector."
Among commercial properties, the most troubled have been hotels and shopping centers, where anemic sales and bankruptcies by retailers are leading to more vacancies and where heavily leveraged mall operators, like General Growth Properties and Centro, are under intense pressure to sell assets. But analysts are increasingly worried about the office market.
(Excerpt) Read more at iht.com ...
“Rental income would then decline and property values would slide further.”
And property tax revenue goes down and then they have to raise your property taxes and it goes on.......
Supply and demand thing again.
There can't be the historically normal growth patterns when a nation murders its next generation in the womb.ALL aspects of population and trade become skewed.It is as though a nation lost a generation in a war;it will take a long time for the effects to fade.
sounds about right. I have read and heard from RE agents, that commercial RE, runs one year behind residential RE.
How soon before we here calls for a Commercial property bailout??
Eventually, this will be followed by bailout plans for the credit card industry, public/private pension plans,profesional sports franshises, newspapers, magazines etc.........
Why do new buildings continue to go up then?
sounds about right. I have read and heard from RE agents, that commercial RE, runs one year behind residential RE.
seems some bloated governments are going to decline.
I wonder what that woman who said obama is going to pay her mortgage and fill her gas tank is going to do?
Commecial property taxes SHOULD decline. If anything they need an emergency tax cut to keep them in business.
Small business is going to rescue this ecconomy. The UAW et al is a liability not an asset.
Commercial buildings large enough to notice are irrevocably committed to about three years before completion, one to two years before tower erection.
“There can’t be the historically normal growth patterns when a nation murders its next generation in the womb.ALL aspects of population and trade become skewed.It is as though a nation lost a generation in a war;it will take a long time for the effects to fade.”
As one who grew up in the post-Roe v. Wade era, we were told that birth control and abortion were good things, in order to prevent overpopulation. Now our politicians are allowing mass illegal immigration into the country. I think your observation is correct. Or we are just creating a new set of problems...
In addition, more and more work does not require face to face. There’s teleconferencing, work from home, webinars, conference calls. It seems most of my meetings are on a call rather than face to face. In effect the physical office complex will begin to go the way of the print media, though not as drastic.
C2K
SMALL BUSINESS? Yea, I don’t know how it is where you live, but most commercial malls, strip malls and sky scrapers aren’t owned by any small businesses in my town.
Not really, particularly in malls. In fact, I was amazed how little there actually is in the big mall by me. A couple of big department stores, and the rest was OVERWHELMINGLY clothing stores and those were overwhelmingly big national chains. I’d say if you took out the 3 big anchor dept. stores, 90% of the mall was clothing.
Malls are not what they were 10 or 20 years ago. No bookstores, few specialty shops, etc. EBAY and the Internet has gotten rid of specialty stores in malls, no need to pay their exorborant rents for foot traffic anymore. I can’t even tell you the last time I walked into any mall that had a bookstore at all.
Reality is, Commercial Real Estate was just as overvalued as Residential thanks to easily available credit, and it took a bit longer for its contraction to happen, but now its here.
The second shoe hasn’t even begun to drop on this mess folks, there is a lot more to go.
It’s true that ebay now gets the business that used to go to mall specialty stores- but the malls ran those folks out with outrageous rent long before ebay filled the niche. A friend of ours had a booming business in a specialty item and was convinced to open a shop in a mall- the rent ate him alive so he moved back to his little shop. Some merchants hung on until they were broke hoping the traffic would pay the rent.
Very good points there. The New York City area might be unique in this respect, but many of the older suburban regional malls still have a lot of small specialty stores. Big box retailers haven’t gotten the same strong foothold here as they have in other places (mainly because it’s hard to find big parcels of land suitable for big box retail centers).
Family website here, let's try to keep it clean.
...and why don’t we just say NO to our representatives!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.