There were lots of deliberations that the US commercial property sector would rise in a little while but the sordid events in the month of last October have sealed the fate of optimism almost. In that fateful hour US commercial property sector was almost ravaged with the property values declined to the lowest level in more than seven years for the reason that unemployment reduced demand for apartments, offices and retail space.
According to the recently released statement of Moody’s Investors Service Inc., the Moody’s/REAL Commercial Property Price Indices fell 1.5 percent in October from September to the lowest since August 2002. What is more, prices were down 36 percent from a year earlier and are 44 percent below the peak in October 2007, confirms the same statement.
There is hardly any doubt that the values are dropping as U.S. unemployment is rising without a single break and consumers (finding no other options) are busy in diminishing expenditure. Office vacancies may approach 20 percent next year as employers hold off hiring, commercial property brokers Jones Lang LaSalle Inc. and Grubb & Ellis Co. said last month.
It has also been learnt that an predictable $1.4 trillion of commercial real estate debt is planned to mature over the next five years and as per the estimation of Foresight, 53 percent of it is “underwater,” meaning the value of the property is less than the mortgage.
Will there be any relief before long? Nothing can be said with conviction at the moment but it is almost evident that property values may decline by a total of 50 percent from the peak to the bottom soon.
This data is also important. In accordance with the latest statistics of Labor Department, U.S. unemployment rate fell to 10 percent in November from a 26-year high of 10.2 percent in October.
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