Headlines – Week of April 11, 2010

April 18, 2010

Office Vacancy Rate Hits New High (from Reuters News)

The office vacancy rate in the United States reached 17.2 percent in the first quarter, the highest since 1994, according to research firm Reis Inc.

The rate was 2%  higher than it was a year ago as asking rents fell 4.2% and effective rent was down 7.4%  from a year ago.

Reis analysts said they expected that rents will continue to decline and vacancies rise through 2010 and probably 2011.

But over the long term, Reis points out that tight credit markets have slowed office construction. This year, only 3.6 million square feet of new office space will be added, the lowest number of completions since Reis began keeping track of this data in 1999.

Full Article

Experts aren’t ready to make the call on recession (from USA Today)

The National Bureau of Economic Research (NBER), the group that formally declares the beginning and end of recessions, said Monday it isn’t ready to declare that this downturn is over, though many leading economists firmly believe it is.

The NBER is a panel of academics and said most economic indicators “have turned up.” The panel noted that the data is quite preliminary and will be revised.  They stated that pinpointing the month the slump bottomed “would be premature.”

Nearly all the indicators, including economic growth, industrial output, income and retail sales, have been trending upward in recent months. The economy grew 5.6% in the fourth quarter and even added 162,000 jobs in March which the first significant gain since the recession started in December 2007.

A big reason for caution in calling an end to the recession is that the job market has yet to show two consecutive months of big increases.

Many economists believe it ended in June, meaning it lasted 18 months.

There is still a chance the economy could slip back into recession, though most economists say the risk has been shrinking. The committee pronounced the 1980 recession over in July that year, waiting a year to make the call.

It’s not uncommon for the panel to be slow to call the start and finish of recessions. It took a year, 21 months and 20 months, respectively, to declare the 1980, 1991 and 2001 recession history. The 1991 and 2001 recessions were also plagued by job markets that lagged overall recoveries as employers learned to produce more with fewer workers.

Full Article

Commercial mortgage delinquencies spike in March (from ABC News/Money)

The delinquency rate for commercial mortgage-backed securities posted its largest increase ever in March, Moody’s Investors Service reported Wednesday, blaming most of the gain from the collapse of a $5.4 billion housing deal in New York.

The ratings agency said that the rate rose 69 basis points in March, a $4.3 billion increase as 343 loans became delinquent.

But 45 of the basis points were attributable to the loan for the Peter Cooper Village and Stuyvesant Town housing project in Manhattan. A $3 billion loan for the development moved into delinquency in March.

The project, which would have been the most expensive real estate deal in U.S. history, fell apart in January when a developer team could not make a $16 million loan payment. The team, led by Tishman Speyer Properties and BlackRock Realty, turned the 110 buildings that make up the complex over to creditors, saying it was the only alternative to bankruptcy.

Commercial mortgage backed securities have suffered with the sharp downturn of the market for properties like offices, retail centers and multifamily housing.

Moody’s wrote that some sectors have shown some signs of life, such as loans for multifamily projects and hotels. The rate of increase in delinquencies has slowed in recent months. But the rate of increase for projects like office and real estate continues to rise unabated.

Even with the Peter Cooper Village default, the eastern region remains the best-performing part of the country. The south holds the largest percentage of delinquent loans.

In other news about commercial real estate loans, Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel said that by the end of 2010, about half of all commercial real estate mortgages will be underwater.  Most of these loans are concentrated in the mid-sized banks.  She stated there are now 2,988 bank that have dangerous concentrations in commercial real estate lending. Her interview was seen on CNBC.

Full Article

Posted by Scott R. Lodde

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