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Commercial Real Estate Market Conditions Continue to Weaken
The problems in U.S. financial markets and the broad economic downturn are having a negative effect on income-producing real estate, including office buildings, shopping malls, warehouses, hotels, and apartment buildings, according to a Real Estate Roundtable third quarter survey of senior real estate executives.
survey of senior real estate executives.
Compared to a year ago, 84 percent said credit availability is “much worse.” Equity financing conditions are worse as well, with 51 percent characterizing equity financing as “somewhat worse” than one year ago.
Changes in expectations for the coming year have declined since April 2008 by 10 percent for general real estate and by 6 percent for capital markets. Almost no respondent expects a significant improvement for the next 12 months.
“There is growing concern about where commercial property net operating income might be trending given general economic conditions,” says Jeffrey D. DeBoer, Roundtable president and CEO. “Real estate continues to face one of its biggest liquidity challenges in over a decade. Even though loan delinquencies to the sector are very low, the ongoing lack of credit for real estate has led to weaker property values and has stalled transactions.”
Of those polled, 42 percent expect “somewhat better” conditions in the overall real estate market. Only 13 percent anticipate “somewhat higher” asset values in overall real estate markets in the 3rd quarter of 2009, while 44 percent expect real estate asset values to be “somewhat lower.”