Now that the housing market has stabilized and prices are beginning to rise, attention is turning to what is often called the next big crisis: commercial real estate.
Mortgage-backed securities helped sink the residential market, and worries are widespread that the $700 billion in such securities backed by commercial mortgages will lead to similar problems in that sector.
The traditional, core commercial holdings of banks also are under suspicion. Deutsche Bank estimates losses will amount to 11 percent to 15 percent on the $1 trillion in such mortgages held by banks.
A commercial version of the real estate meltdown, however, may turn out to be a calamity that is more anticipated than experienced.
And while the southern New Jersey commercial market is weak, it’s also showing signs of what may be the start of a rebound.
No surprise
J. William Mills, president of PNC Bank’s Philadelphia and southern New Jersey region, thinks a true crisis is more of a surprise. Read more of this article »
With credit still tight for investors in commercial real estate, CNBC sat down with real estate moguls Bill Rudin and Steven Roth to discuss the sector and the pace of recovery.
“What’s happened is after a vicious, very sharp down draft, we are now in a process of seeking a bottom. And that bottoming process can probably go on for two years, maybe even longer.”
—Steven Roth, chairm
an of Vornado Realty Trust
“In terms of commercial real estate in New York, we’re seeing activity. That’s the positive sign; that there’re people now as opposed to six months ago when there was no commercial leasing. In the third quarter of ‘09, there were 12 major leases signed over a hundred thousand feet in New York City.”
The economy is not out of the woods yet—at least from the perspective of Peter Roberts, chief executive officer for commercial real estate firm Jones Lang Lasalle.
Roberts said he’s not very bullish on the economy right now.
“Commercial real estate lags the economy. We’ve got to get the economy off its back and going before commercial real estate follows,” Roberts said in an interview with FOX Business Network Anchor, Brian Sullivan. “Because commercial real estate lags, that’s why we’re not that optimistic.”
Roberts expects office vacancy rates to peak near 20% sometime in late 2010 or early 2011. Commercial real estate markets, which had a heavy concentration of financial services firms prior to the recession, will be the hardest hit, Roberts said, since the financial sector suffered the bulk of the pain. He noted that there was one pocket of strength.
“Washington DC is the one that is probably most immune to what we’re experiencing in most of the country,” Roberts said, due to the expansion in government employment since the onset of the financial crisis.
Roberts is also on the board of directors at Corus Bank, which held $5 billion in loans on condominiums and other commercial property before it was put in receivership. In response to a question about what to expect from the bank’s loan auction, Roberts said, “there are definitely interested parties going back to looking for opportunities…a bunch of debt purchasers are going into that sector—watch that space.”
The Daytona Beach Advertising Federation held its monthly meeting today at the Daytona International Speedway. The guest speaker for the event was Tyler LeCompte, of MeHype.com fame. Tyler gave a comprehensive review of everything related to utilizing social media in your business.
Of course if you are reading this, you are pretty familiar with social media right?
Earlier today, Rick Davidson(CBC President and COO) met with the Benchmark Team at the World Golf Village in St. Augustine Florida. Rick Davidson joined G.G. Galloway just a few weeks ago to Climb Mt. Ranier and Mt. Hood in the annual CBC Climb for Kids Sake.
Rick Davidson was joined by Greg Sexton and Jason Silfies. Sexton is the Senior Vice President Franchise Sales, and is responsible for the growth of the CBC brand throughout the United States. Silfies is the Vice President Marketing & Technology for CBC.
Benchmark had 35 professionals in attendance, in an incredible show of faith from Davidson by attending an individual CBC affiliate meeting. Rarely do we see directors of major real estate companies granting this kind of access to its agents. Davidson covered his thoughts and perceptions of the current market conditions, as well as pointing out some great opportunities for CBC professionals in these amazing times.
This was the first of what will be monthly meetings in St. Augustine to allow more collaboration between the Ormond Beach and Jacksonville offices of CBC Benchmark.
GAINESVILLE, Fla. – Aug. 12, 2009 – Florida real estate won’t rebound until the job market improves, but investor confidence in the outlook for business and availability of money are reasons for cautious optimism, according to the latest University of Florida (UF) survey.
“I think we’re on the road to recovery, and even though most markets report they’ve seen the bottom, it’s going to be a long climb; because as long as we continue to lose jobs, the real estate market will be depressed,” says Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies, which conducts the quarterly survey.
The retail and office sectors of Florida’s real estate market are suffering the most because a large number of people are out of work or uneasy about their jobs, and spending less money, Becker says. Unless consumer buying patterns change dramatically, national retailers will continue to pull back with more store closings and fewer store openings.
There is some good news, though: Signs of confidence expressed by respondents in March about their personal business outlook and the availability of real estate investment money have grown stronger. That optimism is spreading to other types of property. Read more of this article »
DAYTONA BEACH — The local economy is showing signs of stabilizing, if not recovering, and Volusia County officials highlighted some of the bright spots for community leaders on Friday.
“The good news is, despite the reports in the newspapers, the world is not coming to an end,” said Phil Ehlinger, interim director of the county’s Economic Development Department.
Ehlinger and County Chairman Frank Bruno presented the county’s second-quarter economic development update Friday to a group of business and political leaders gathered at Daytona Beach International Airport.
Ehlinger said companies, such as Raydon Corp., Sparton Corp., AO Precision Manufacturing and KVar Energy Savings, are expanding their local operations and adding jobs. Read more of this article »
Today you can lease industrial, flex space, and warehouse properties in the Daytona Beach area for roughly half the asking rates of one year ago – I spent this morning negociating a lease for $4.50 per square foot – GROSS – he current advertised price on this building is $7 triple net, which equates to $8.90 gross – nearly HALF off. Our Team here at Benchmark leased 4,000 SF of flexspace last week for $4.20/FT gross.
Surely in this economic climate, deep discounts on commercial property will yeild some benefits, and help small businesses take chances on expansion? Here is a building that is $5 gross – asking price 10,000 SF Warehouse for $5/FT gross
WASHINGTON (AP) – June. 25,2009 – The Federal Reserve sought Wednesday to defuse fears that the trillions it’s spending to revive the economy could spark inflation later on. But Wall Street didn’t seem to buy it.
Fed Chairman Ben Bernanke and his colleagues said that despite an easing of the recession, the economy remains frail enough to keep inflation at bay.
Fed policymakers held a key bank lending rate at a record low of between zero and 0.25 percent and pledged to keep it there for “an extended period”‘ to help brace the economy. The Fed made no new commitment to expand its purchases of government bonds and mortgage securities, to try to drive down rates on consumer debt. That rattled bond investors who fear the prospect of higher interest rates.
But Wall Street zeroed in on the Fed’s new observations about the risks of deflation and inflation.
Fed policymakers dropped language they had used in the statement at their last meeting in April that the weak economy could trigger deflation — a destabilizing and prolonged bout of falling prices and wages. This also spooked bond investors, who took the Fed’s decision not to mention deflation to mean inflation might arise later.
The Fed acknowledged that energy and other commodity prices have risen recently. But policymakers predicted that idle factories and the weak employment market would make it hard for companies to Read more of this article »
LOS ANGELES – June 16, 2009 – With prices down, small investors in commercial property are returning to the market searching for properties to buy, says Dana Brody, a practitioner with Grubb & Ellis in Los Angeles.
Brody says even though there are some eager buyers, the market remains slow because buyers are holding out for better deals, and few sellers are willing to take lowball offers.
Richard Ziman, manager of a $630 million real estate investment fund, says waiting may be a good idea. But for those determined to buy, he suggests making a supportable offer. His advice: Calculate how much it would cost to build the target property – the replacement cost – and offering that. Ignore the value of the land, he says.
The kinds of properties on Ziman’s buy list include mobile home parks, industrial buildings, and small retail centers anchored by grocery or drug stores. He also warns investors away from mom-and-pop operations. “Mommas and poppas are dying,” Ziman says.
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