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Commercial real estate sales plunge(across the globe: 70% drop in 2009)
Silicon Valley / San Jose Business Journal ^ | 04/17/09 | Katherine Conrad

Posted on 04/20/2009 6:26:33 AM PDT by TigerLikesRooster

Commercial real estate sales plunge

Silicon Valley / San Jose Business Journal - by Katherine Conrad

Commercial real estate sales plummeted across the globe with transactions dropping in the first quarter more than 70 percent from the end of 2008, according to a report released this week by Real Capital Analytics.

The New York-based firm said sales in the first three months of 2009 were just one-sixth of the number of buildings that traded two years ago. All told just over 1,000 buildings valued at $47 billion were sold in the first quarter of 2009.

Another worrisome sign is the rise in the number of distressed properties. Real Capital reported that another $55 billion worth of assets fell into default on their mortgages during the first quarter, bringing the total value of assets known to be in distress to “a stunning $153 billion,” an jump of 56 percent over the fourth quarter of 2008.

Of the properties across the globe that are in trouble, 85 percent are located in the United States, Japan, Spain, the United Kingdom and Australia. Real Capital noted a trend emerging in which lenders are extending the loans rather than forcing payment, calling it “kicking the can down the street.”

By the end of March, $36 billion worth of debt had been restructured.

(Excerpt) Read more at bizjournals.com ...


TOPICS: Business/Economy; Extended News; Foreign Affairs; News/Current Events
KEYWORDS: commercialrealestate; plunge; thecomingdepression
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To: Southack
"I agree that the markets are correcting for past excesses/mistakes, but my question was bascially “How does a landlord profit when the value of his land declines by more each year than his rents earn?”"

Same way slum lords have always made money on properties that are constantly declining in value. You keep them occupied until the city condemns them, then you abandon the property and let the city reclaim it for back taxes. This saves you the expense of having it torn down and the hole filled in.

21 posted on 04/20/2009 7:14:36 AM PDT by Nathan Zachary
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To: Southack

I understand, but that wasn’t your question. Your question was “Does capitalism only work during inflation?” The answer is that capitalism works all the time. Deflation is the correction that capitalism imposes on the market.

Now as to how does a landlord make a profit, well that is a business question, not a philosophical question. Now I do agree certain conditions have to be present to allow capitalism to work, but inflation isn’t one of them. I would say that political stability, enforcement of private property rights, and ability to adjudicate disputes with finality are among those conditions.

But to ask if capitalism only works during inflation presupposes, in my opinion, a flaw in capitalism that requires a certain unsustatainable or malevolent circumstance to “work” (sort of like those who used to posit that capitalism “only works during wartime”).


22 posted on 04/20/2009 7:16:19 AM PDT by Larry Lucido
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To: Toddsterpatriot
"Last year it took almost $150 to buy a barrel of oil, over $4 to buy a gallon of gas. Oil is now $47, gas about $2."

You can't claim deflation based on a few sectors of the entire market place loosing value.
Everything else is generally more expensive. Have you bought any groceries lately? Tires, garden hoses, etc etc.? Inflation is alive and well.

23 posted on 04/20/2009 7:19:33 AM PDT by Nathan Zachary
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To: TigerLikesRooster
Commercial real estate sales plunge

You See! Another sign Obama has fixed the economy. Better shop now before all those bargain sales end, this economy is getting ready to boom! /msm

24 posted on 04/20/2009 7:27:18 AM PDT by douginthearmy (Until I get the proper order at the drive-thru, the unemployment rate is too LOW!)
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To: Nathan Zachary
You can't claim deflation based on a few sectors of the entire market place loosing value.

I agree, but your question was, "Where is the dollar gaining in value?"

25 posted on 04/20/2009 7:28:58 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: TigerLikesRooster
In a free market, the the price of real estate would adjust according to the change in demand.

In this bizarro manipulated economy, somehow it is the responsibility of the taxpayer to shore up the profits of people who bought real estate at artificially inflated prices.

26 posted on 04/20/2009 7:31:16 AM PDT by meadsjn (Socialists promote neighbors selling out their neighbors; Free Traitors promote just the opposite.)
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To: TigerLikesRooster

Warehouses to be converted into apertments or as they are called in chicago the projects.


27 posted on 04/20/2009 7:36:03 AM PDT by Vaduz
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To: Nathan Zachary
"Inflation is alive and well." -Nathan Zachary

Are you smoking crack, man?!

Did you see oil today?
..... VALUE .....CHANGE ....% CHANGE
Oil .. 46.87 ....... -3.46 ........ -6.87

Rubber Poised for 35% Decline as Tire Sales Signal Biggest Drop Since 1975

Citigroup Credit Losses Are Rising at `Rapid Rate,' Goldman's Ramsden Says

San Francisco Area Home Prices Fall Record 46 Percent

Retail sales tumble in March, casting doubt on recovery

Los Angeles Times - ‎Apr 14, 2009‎
Retail sales had been projected to rise 0.3% in March after an originally reported 0.1% decline the prior month, according to the median estimate of 73 ...

CME: Retail Price Decline for All Meat Sectors

ThePigSite.com - ‎Apr 17, 2009‎
According to USDA's monthly Meat Price Spreads, released yesterday, retail prices for all four main meat species fell in March with the decline in chicken ...

28 posted on 04/20/2009 7:43:46 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Southack

Yeah, but a can of corn is more expensive!


29 posted on 04/20/2009 7:45:47 AM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: wombtotomb

[other shoe dropping. Clearly predicted on here for months now.]

I do commercial real estate. 2008 was disastrous, this year we will get some deals done hopefully before it all crashes again. May be time to rework my resume for the umpteenth time.


30 posted on 04/20/2009 7:52:07 AM PDT by FastCoyote (I am intolerant of the intolerable.)
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To: Toddsterpatriot
Metal prices level off, signs of easing in construction: BDO
*Steel prices decline 1.5 times faster in Q1-2009 than in 2008
31 posted on 04/20/2009 7:56:29 AM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Nathan Zachary
I trade SRS and can't figure out why it is down so much.

Commercial real estate will take a hit, but people apparently are buying into Simon Property Group and various other REITS that make up the DJ Real Estate Index...doesn't make any sense to me.

32 posted on 04/20/2009 7:56:39 AM PDT by demsux
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To: demsux

“but people apparently are buying into Simon Property Group”

Simon’s business model is different from a lot of others in many ways, mainly in the percentage of debts they carry.

Unlike the big corp that filed BK last week, they don’t leverage everything to the hilt, and constantly refinance to extract more cash, like many Commercial property-holders do.


33 posted on 04/20/2009 8:01:37 AM PDT by tcrlaf ("Hope" is the most Evil of all Evils"-Neitzsche)
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To: tcrlaf

I had to close my mall based store after Christmas and many more were closing also...even without the debt, it would seem that their cash flow should be suffering.


34 posted on 04/20/2009 8:04:42 AM PDT by demsux
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To: Southack

“It’s problematic. Does capitalism only work during inflation?”

The problem isn’t Capitalism, that works just fine.

The problem is DEBT, DEBT, and more DEBT.
It became fashion in the 90’s to leverage EVERYTHING to the hilt, and cash out rising property values as they went up. They called it “Putting equity to work”.

Now that it is going the other way, the people who did that don’t have the cash to keep up with the fall.

If you maintained a clean balance sheet, kept your debt low, and survived the derision and laughter of your Ferrari-driving friends, you’re doing OK right now.


35 posted on 04/20/2009 8:07:47 AM PDT by tcrlaf ("Hope" is the most Evil of all Evils"-Neitzsche)
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To: FastCoyote
May be time to rework my resume for the umpteenth time.

Can you call a buddy of mine and talk some sense into him? He's been a commercial Realtor for years in Atlanta and he simply refuses to entertain other possibilities or opportunities.

36 posted on 04/20/2009 8:10:51 AM PDT by numberonepal (Don't Even Think About Treading On Me)
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To: Nathan Zachary

“until the city condemns them, then you abandon the property and let the city reclaim it for back taxes. This saves you the expense of having it torn down and the hole filled in.”

It’s DIFFERENT with Commercial properties...

We have people who ACTUALLY MAKE MONEY, (almost ALL of them Inner-city DEMOCRATS. of course), by purchasing commercial centers in decline, CLOSING THEM, and allowing them to become eyesores and crime centers, until the cities are forced to step up and buy them, at a LARGE PROFIT for the investor!!

In Indiana alone, this has happened SEVERAL TIMES. Research the Fort Wayne Southside Mall fiasco.


37 posted on 04/20/2009 8:12:02 AM PDT by tcrlaf ("Hope" is the most Evil of all Evils"-Neitzsche)
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To: TigerLikesRooster

Thanks for the ping.


38 posted on 04/20/2009 8:13:45 AM PDT by GOPJ (If Obama had been king of England, the Globe wouldn't have covered the American Revolution-Graham)
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To: TigerLikesRooster
Stay away from these malls, which will become strongholds for bandits who would raid and plunder nearby neighborhoods.

Gang members will take over - and you're right - don't want to live near one.

39 posted on 04/20/2009 8:15:48 AM PDT by GOPJ (If Obama had been king of England, the Globe wouldn't have covered the American Revolution-Graham)
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To: tcrlaf
Don't know how reliable this source is, but if true, it's troubling...

http://turnerradionetwork.blogspot.com/

The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.

The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.

When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this "main stream media" report.

The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Put bluntly, the entire US Banking System is in complete and total collapse.

40 posted on 04/20/2009 8:17:56 AM PDT by demsux
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