Commercial Real Estate Could Drop 15% -- Bloomberg

Prices of U.S. commercial real estate could fall up to 15% in what would be the worst decline since the 2001 recession, Bloomberg reported Wednesday. "People aren't willing to do deals right now," said Howard Michaels, chairman of Carlton Advisory Services. "The expectation is that prices will come down." In July, investors bought the fewest commercial properties in almost a year and apartment building purchases were down 50% from June. Last month, the Archstone-Smith Trust postponed its $13.5 billion sale to a group led by Tishman Speyer Properties until October. Mission West, which owns commercial properties in Silicon Valley, said two weeks ago that its $1.8 billion sale might collapse because a bank has withdrawn funding. "There are so many deals falling apart," said David Lichtenstein, CEO of commercial property owner Lightstone Group. "People who can get out are getting out." Morgan Stanley industry analyst Matthew Ostrower forecast that average prices for commercial properties could fall 5-15% in the next two years. The cost of commercial mortgages, which have risen in tandem with rising defaults in the subprime sector, has stopped a record-breaking rally in commercial real estate. "No one's going to want to sell in this environment, because you're not going to get your price," said James Corl, CIO for real estate securities at Cohen & Steers Inc.

Sources: Bloomberg
Commentary: Commercial Real Estate Could Be Next Victim of Credit Market Woes • Equity REITs Not Yet At Fair Value • Investing in Commercial Real Estate • Tishman & Lehman Near Agreement to Acquire Archstone-Smith REIT for Over $20 Billion
Stocks/ETFs to watch: ASN, REG, DDR, KIM, WRI. ETFs: RTL, VNQ, FTY

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Comments

[San Diego L...:]

Hi, interesting blog. Thanks for the read!

I just noticed in today’s headlines that the Realtors pending home sale index fell by 12.2% for July 2007. This is a huge drop especially considering that most economists thought it would only be off by 2%.

Today I noted in a San Diego real estate broker’s blog (www.brokerforyou.com/b.../) an interesting post about this as well as some really eye opening statistics for the San Diego real estate market.

You definitely want to view the chart posted on August 27th showing the one year value decline for condominiums in the San Diego area. This chart shows that in one zip code, values were off by over 34.2% in just this time period. When one considers that the top of the market was actually sometime around the summer of 2005, there is a good possibility that before this is over, some real estate values could be off by 50% or more from their peak.


San Francisco attorneys</font>...

2007 Sep 05 01:57 PM