US commercial real estate sinks

It seems that the condition of the commercial real estate market in the domain of the United States of America is getting exorbitant with the passing of each day. What can be the most prominent reason behind this? Well, according to the economic pundits, loan defaults are rising by leaps and bounds and this along with several other factors may lead to the worst situation in these decades, if not more.

On the other hand delinquency rates on loans for hotels, offices, retail and industrial buildings have reached an inconceivable height in recent months. In accordance with the views of experts, this may get heightened throughout both 2009 and 2010 thanks to regular lay offs and shutdowns of units of companies. It is to be noted that the fortunes of commercial real estate market are tied closely to those of the sinking economy, especially unemployment, which hit 8.1 percent in February.

Christopher Stanley, an associate with research firm Reis Inc. said on the extent of the situation,
“Until jobs start coming back and industry starts doing better we don’t see performance increasing” among landlords. On the other hand, as per Hessam Nadji, Managing Director at Marcus & Millichap Real Estate Investment Services in Walnut Creek, California, While the commercial real estate industry’s woes led to the recession of nearly 20 years ago, this time the industry is “the victim of the economic and financial crisis.”

What’s more, there are high chances that vacancies at retailers may increase up to 11 percent by the end of the year and office vacancies are expected to hit 18 percent by year-end, as stated by observers.

In addition, as stated by a report by Detusche Bank earlier this month, the whole of the commercial real estate market is “at the precipice.” The delinquency rates, till now, are up to 1.8 percent of loans in March and this is more than four times the year-ago level. The worst performers have been retailers, office building owners and apartment buildings. Though other sectors like hotels and industrial properties are faring, they are still unsatisfactory.