Predictions of a commercial real estate bust are a bust

[DCBob]

From Bloomberg..

From Manhattan office towers to apartments in Florida to retail properties in Washington, commercial real estate values are rising, defying predictions of a collapse that would drag the U.S. economy back into recession.

Prices of commercial properties sold by institutional investors surged 19 percent in 2010, the second-biggest gain on record, according to an index developed by the MIT Center for Real Estate. Investments in office properties, the largest part of the market, more than doubled last year to $41.6 billion, according to Real Capital Analytics Inc., which tracks commercial property sales globally.

Near record-low interest rates are luring buyers with the prospect of cheaper financing and higher returns. Lenders are beginning to sell distressed properties and loans as rising earnings give them a cushion to absorb losses. Investors, convinced the worst is over, have pushed prices on commercial mortgage-backed bonds to the highest level in two years.

“Give a little credit to the strategy put forward by the government: keeping interest rates low and giving lenders some flexibility to hold these troubled assets on their books for a while,” Dan Fasulo, managing director at New York-based Real Capital, said in a telephone interview. “Now that values are on the upswing, it’s given owners and lenders more wiggle room to work out these troubled situations.”

Commercial real estate transactions may climb 40 percent to $135 billion this year, Chicago-based Jones Lang LaSalle Inc., the second-largest publicly traded broker, said on Feb. 2. U.S. commercial real estate values, which fell 45 percent from the October 2007 peak to the trough in August 2010, have risen three consecutive months, according to Moody’s Investors Service.

more: http://www.bloomberg.com/news/2011-02-04/commercial-property-recovers-in-u-s-as-tsunami-of-distress-fails-to-hit.html



Graph from: http://mjperry.blogspot.com/2011/02/commercial-real-estate-makes-comeback.html


The gloom and doomers are wrong once again.

[rfranklin]

1. From a one tenth of one percent you are claiming recovery?

Retail vacancy rates are expected to drop a very modest amount, from 13.1% in the current quarter to 13% in the fourth quarter of 2011. Average rents are also expected to drop 0.3% in 2011, far better than the 3.4% drop in 2010. Still, that’s not exactly high rolling.
Vacancy rates in office buildings are forecast to fall from 16.7% in the current quarter to 16.4% in the fourth quarter of next year. Most of the change will occur in the last half of the year. Office rents are expected to be 1.8% lower this year and then to fall another 1.6% in 2011.


Read more: Commercial Real Estate Could Be Recovering - 24/7 Wall St. http://247wallst.com/2010/11/29/commercial-real-estate-could-be-recovering/#ixzz1DlCGOxaJ

What you are seeing is speculation based on almost free money. It doesn't create jobs and without jobs there can't be any real recovery.

You may say gloom-and-doom but if you do not realistically assess the situation you cannot do anything proactively to improve it. But then again, you can be optimistic while crossing your fingers, and hope that as Mr. McCawber said, "Something will turn up..."

[DCBob]

3. Im not claiming "recovery".. I am claiming a collapse has been averted..

Many were saying it was inevitable and would happen sometime last year. It didnt.

[Taitertots]

2. No one cheers when a crisis is averted

Why not just make the title "Fed policies work to avoid further collapse"?

[nashville_brook]

4. the reason CRE is booming is b/c they got cramdowns.

[Scurrilous]

5. Thanks.

K & R :thumbsup:

[Liberal_in_LA]

6. lots of empty storefronts in los angeles