Continuation of Pessimism Not Warranted

By Natalie Dolce

LOS ANGELES—With the amount of money the government was putting into the economy, it was inevitable that things would recover. We have regained 8 million jobs added since the bottom of the recession and the continuation of the pessimism and uncertainty isn’t really grounded. That is according to Hessam Nadji, SVP and chief strategy officer of Marcus & Millichap.

Nadji joined moderator Michael Desiato, moderator and VP and group publisher of ALM’s Real Estate Media Group, and other industry leaders at the recent RealShare Los Angeles event here on Tuesday. According to Nadji, “the notion that the US economy was out of the game is always wrong. We do find a way to come back.”

Having said that, Nadji says the growth rate isn’t anything to write home about. “But this moderate level of growth is here to stay.”


Panelists on the industry leaders panel say the moderate level of growth in the economy is here to stay.


Panelist Marc Jacobs, managing director of Oaktree Capital Management, agreed, noting that the real estate market is on solid footing, at least in the near term. But there are early signs of caution out there, he warned. “It may not be real estate in general, but it might be corporate America that is loading up on cheap debt and will struggle to pay that debt back,” he said. “What will happen once the Fed starts pulling back?”

According to Eric Paulsen, CEO at, property values are still below their peaks, so there are still opportunities there. “An improving transactional market is always a better market. We willcontinue to see more and more sales with moderate improvement in the coming year.”

On the apartment side, according to Nadji, if you look at the recovery, “you are on the money about the apartment recovery being the only one for a long time.” But what’s interesting, he said, are to look at the fundamentals. “We should be seeing a slow down, but we aren’t really seeing that. The math still works for the most part but the big question mark is exit cap rates.”


We have regained 8 million jobs added since the bottom of the recession and the continuation of the pessimism and uncertainty isn’t really grounded, said Nadji (right) with Xceligent’s Doug Curry (left) and Oaktree’s Mark Jacobs.


There are some overbuilding on the high-end apartment side, warned panelist Mark Jacobs, managing director of Oaktree Capital Management.

“You will still see rent growth on the apartment side,” added Paulsen, but you are seeing more on the retail and office side, he said. Investors are chasing yields, with a lot of money chasing fewer assets. So what do they do? They go to a different market, he said. “One of the reasons you are seeing a bigger movement in secondary is the availability of information out there among other things.”

One of the companies with that information is Xceligent. Panelist Doug Curry, CEO of the company, said that his company is trying to bring a different level of transparency to the market with data collection.

The biggest laggard in this recovery has been office, according to Nadji, because of the excess space that was never put back on the market, and companies are now growing into that space. But that is the place to now invest, he said. “The demographics in job creation look strong… It is the year of the office market. The turning point is there. You will see the office market come back fast from this point forward.”    [emphasis added]   

Paulsen agreed that office is the place to go right now, but what’s important to consider, he said, is what the product will look like. “You are going to have to cater to a different demographic.”

Why Investors in Net Leased Properties Need Asset Managers

Net leased investments remove a lot of the complexity from individual property investing by focusing on properties which in many ways manage themselves. Still, administrative burdens and complexities exist and to the uninitiated it can be daunting.

Tenants in net leased properties are responsible for most of the onsite maintenance and upkeep of the property. However, there is still a need to collect the rent, pay some bills, keep a set of books, get the tax return prepared, make distributions and prepare for a re-sale when the current tenant’s lease expires, or sooner.

An asset manager can add significant value by dealing with these issues. The cost of an asset manager is relatively low based on the services provided.  An asset manager will handle all of the day to day details associated with the property like collecting rent, paying bills, including the mortgage payment, providing monthly reports, arranging for tax return preparation, and making the required cash distributions. They can also provide guidance and insight as to current market conditions, transaction support and due diligence in the acquisition and disposition of the property itself, and sound advice on the positioning of the property throughout its holding period.

Professional asset managers can provide advice as to when the optimum time to sell is, and whether there are other net leased property opportunities that might provide a better return.

Net leased properties are one of the most passive real estate investments in the market. However, like all investments, proper management is needed to ensure a stable and substantial payoff.

We would be happy to discuss our professional asset management services.

Severity of Commercial Real Estate Impairment of Banks Is Decreasing

While commercial real estate continues to burden the nation’s 7,584 insured banks and thrifts, the severity of the CRE-related impairment is gradually decreasing. Most of the recuperation is stemming from write-downs and attrition in construction and development loans, the dearth of new lending and from improvement in the multifamily sector.
Busted Bank
As deteriorating conditions lessen, the amount of capital that banks have available to loan should increase. Banks are already setting aside fewer dollars to deal with the losses, according to the FDIC. New provisions for loan losses fell to $20.7 billion in the first quarter from $51.6 billion a year earlier. This marks the sixth quarter in a row that loss provisions have had a year-over-year decline. It is the smallest quarterly loss provision for the industry since third quarter 2007.

“Certainly this has been aided significantly through the continued low interest rates engineered by the Federal Reserve,” noted CoStar Group Senior Real Estate Strategist Christopher N. Macke. “If the termination of QE II or some other factor leads to rising interest rates, banks will have to rely on strengthening property fundamentals to offset the rising rates – commercial real estate’s version of “The Amazing Race.”

The total amount of CRE loans outstanding fell by $32.3 billion (2%) during the first quarter. At the end of March, insured institutions reported holding $1.58 trillion in CRE-related loans, down from $1.61 trillion at the end of 2010.

The total amount of construction and development loans on bank books fell by $25.9 billion (8%) to $295.6 billion.

The total amount of nonresidential loans (including owner-occupied buildings) on bank books fell by $6 billion (less than 1%) to $1.07 trillion.

However, the total amount of multifamily loans on bank books was flat falling by just $300 million to $214.5 billion.

The total amount of distressed CRE assets (delinquent loans, foreclosed assets and restructured loans) at banks stood at $170.9 billion, just 1.3% of all outstanding bank assets.

Total delinquent CRE loan balances (loans 30 days or more past due or in nonaccrual status) fell by $3.5 billion (2.8%) during the first quarter. At the end of March, banks and thrifts reported $121.6 billion in delinquent CRE-related loans, down from $125.1 billion at the end of 2010.

Delinquent construction and development loans fell by $4 billion (6.9%) to $53.8 billion.

Delinquent multifamily loans fell by $400 million (3.8%) to $10 billion.

However, delinquent nonresidential loans grew by $900 million (a 1.6% increase) to $57.8 billion.

The balances of foreclosed assets continued to grow at the nation’s banks from $30.9 billion at the end of the year to $31.2 billion as of March 31. All of that increase was in nonresidential properties, which grew by $500 million to $10.7 billion.

The amount of foreclosed construction and development projects fell about $100 million to $18 billion; and foreclosed multifamily properties also fell by about $100 million to $2.5 billion.

The total amount of restructured CRE loans at the end of the first quarter stood at $34.9 billion, (the amounts are not available for previous quarters). Of those restructured loans, $16.7 billion (48%) were again delinquent or in nonaccrual status.

The number of insured commercial banks and savings institutions reporting financial results in the first quarter declined from 7,658 to 7,574 in the first quarter. One new reporting institution was added during the quarter, while 56 institutions were absorbed through mergers and 26 institutions failed.

From the big picture of gradual recuperation in CRE bank assets, we’ve pulled together some of the highlights from the individual bank numbers.

  • The number of institutions on the FDIC’s “Problem List” increased from 884 to 888 during the quarter. Assets of “problem” institutions increased from $390 billion to $397 billion.
  • Of the 7,584 insured banks in the country as of March 31, distressed CRE assets made up 1% or less of total assets at 4,298 banks.
  • 566 banks out of the total of 7,584 (7.4%) hold more than 80% of the distressed commercial real estate on bank books. The 10 largest banks in the country hold $49.4 billion in delinquent, foreclosed or restructured assets (29%).
  • Wells Fargo Bank holds $2.24 billion of commercial real estate properties on which it has foreclosed, including $1.14 billion in construction and development properties and $868 million in nonresidential properties. Citibank holds the largest amount of foreclosed multifamily properties at $710 million. While high in dollar amounts, the total amount of CRE distress at these two banks is 1% or less of their total assets.
  • Distressed CRE assets make up more than one-third of total assets at five banks: Builders Bank, Chicago, IL; First Choice Community Bank, Dallas, GA; High Trust Bank, Stockbridge, GA; Security Exchange Bank, Marietta, GA; and Cortez Community Bank, Brooksville, FL.

Ryan Severino: Office Cap Rates Down to 7.4% In Limited Transaction Market

Ryan Severino: Office Cap Rates Down to 7.4% In Limited Transaction Market

Ryan Severino: Office Cap Rates Down to 7.4% In Limited Transaction Market.

(The following is adapted from from a portion of Reis’s latest quarterly Capital Markets Briefing, originally delivered by Ryan Severino, PhD, on 8/25/2010.)


As the slide above illustrates, the mean cap rate for office properties decreased dramatically in the second quarter, from 8.2% in the first quarter to 7.4% in the second quarter.  Mean office cap rates had been steadily increasing since the third quarter of 2008, before fluctuating a bit throughout 2009. Much like apartment, the limited and selective transaction market causes quarterly changes in mean cap rates to be somewhat unpredictable and volatile.  This quarter’s 80 basis point decline, while not unwelcome, epitomizes this ongoing phenomenon. The average price per square foot and the mean sales price increased also increased versus last quarter, even though the number of buildings transacted declined. Therefore, we can conclude that this quarter’s rather steep decline in cap rates is likely due to an increase in the quality of buildings that traded this quarter versus the quality of those traded in recent quarters past. Sentiment in the marketplace is improving, but it is important to understand that a changing mix of buildings from quarter to quarter can have a significant impact on the mean cap rate and we should not confuse this with a change in sentiment in the market.

For better guidance, it is instructive to examine the trend in the 12-month rolling cap rate, which shows that cap rates for the office market might–emphasis on might–have peaked last quarter. It is still too early to tell for certain if we have reached the peak in cap rates for office, especially because of the effect that this quarter’s decline in cap rates is having on the 12-month rolling rate. Nonetheless, this quarter’s decline in the 12-month rolling cap rate is the first time that we have observed a decline in almost two years, since the third quarter of 2008. Although it only represents a slight decline, it is the first indication of stabilization in pricing that we have observed in the office transaction market. The trajectory of cap rates for the remainder of the year will largely depend upon the trend in fundamentals and their impact on sentiment in the market throughout the latter half of the year. Office fundamentals have not yet begun to improve, but if they do during the remainder of the year that could provide support and enthusiasm for office transactions.

Commercial Property Market Coming Back?

There seems to be some indication that the long-awaited commercial property market crash may not happen. US Banks are reporting that 90 day delinquencies are leveling and that more liquidity is coming into the market enabling delinquent loans to be refinanced. Rankin Commercial Properties indicates that institutional investors are coming back into the CRE market once again.

Mark Heschmeyer, writing in the CoStar Advisor, in an article titled, “US Banks Report CRE Loan Troubles Subsiding Amid Strong Quarterly Earnings” reports that: Continue reading “Commercial Property Market Coming Back?”

So Where are the “Good” Deals?

I have investors ask me every week to send them information on the “good’ deals.  You know, the deals where they can buy properties substantially below replacement cost, with an 9%-10% cap rate and 10% cash on cash returns.  After all, there must be a lot of properties that banks have foreclosed on and want to dispose of at bargain prices just to get them off their books.


This is not 1989-1994 where there was an RTC to force banks to take action when loans are delinquent.  Banks are not foreclosing.  There are really very few REO properties banks are trying to sell.  Investors are holding on to their cash waiting for the opportunities that I don’t think will ever materialize.

There as an article in the Wall Street Journal yesterday that illustrates this point completely.  It is about “Distressed Property” funds.  Private equity funds formed by the major investment banks to take advantage of the great bargains that were going to emerge in commercial and multifamily properties.  Those funds are returning billions of dollars to investors because there are no properties to buy that meet the investment criteria. Continue reading “So Where are the “Good” Deals?”

Scarcity of Product And Shortage of Quality Pushes Office Cap Rates Lower

Scarcity of Product And Shortage of Quality Pushes Office Cap Rates Lower

Last year, capitalization rates on large office property sales rocketed from the mid-6 range to the mid-8 range. So far this year, cap rates have reversed course, falling back just as rapidly to mid-7 range. Under ‘normal’ conditions, this would imply that property values are increasing. So why isn’t the commercial real estate industry elated?

Cap rates are a benchmark determined by dividing income by property value. Increasing cap rates typically imply that property values are falling. Last year, no one in commercial real estate doubted that the rapid rise in cap rates reflected an equal rapid decline in property values.

However, this year’s decreasing cap rates, which would normally imply rising property values, are being viewed with some skepticism over whether they reflect a long-term trend in values, or simply a short term phenomenon.

According to Fred B. Córdova III, senior vice president / Investment Services Group for Colliers Asset Resolution Western regional team, the current cap rate phenomenon starts with that fact that there is two to three times more capital (debt and equity) in the market than there is product. That factor alone has pushed values up by 20% in three months, he said.

“There is a flight to quality NOI (net operating income) with a rational ‘governor’ that is price per square foot,” Córdova said. “We are seeing some pricing here in Los Angeles (with cap rates) as low as 5% based on market rates. That said, there is a great deal of anxiety out there as to how far cap rates have fallen in the last six months. Foreign money is leading the charge.”

Continue reading “Scarcity of Product And Shortage of Quality Pushes Office Cap Rates Lower”

Potential for CRE Armageddon Fading

Potential for CRE Armageddon Fading

Weakness, Trouble Remain but Healthy Lenders Could Carry CRE Markets to Better Days

Although first quarter results of U.S. bank holding companies across the country are unmistakably downbeat about the short-term outlook for commercial real estate in general, and their portfolios in particular, they also hint at a growing sense that the problems are working themselves out.

For starters, banks generally reported that troubled loan assets were systematically moving through their books. For example, older construction loans on commercial developments and owner-occupied properties were being shifted to term loans, giving borrowers a chance to work through slow cash flow periods.

Banks were also widely reporting that the inflow of new nonperforming commercial real estate loans was beginning to slow down. At the same time, more of the loans already being labeled as nonperforming were being shifted to the real estate owned (REO) category. From there, it is likely only a matter of time before those assets would be sold back into the marketplace.

In the performing section of their portfolios, banks reported that a substantial portion of those assets have also already been renewed or restructured.

In its April 2010 Global Financial Stability Report, the International Monetary Fund contained a brighter outlook for bank losses in the near term, as expected write-downs on both the loan and securities books of U.S. banks decreased across the board compared to last fall, said Mark Fitzgerald, senior debt analyst for CoStar Group.

“These improved short-term losses are due primarily to two factors. First, signs of an improving economic environment have decreased loss expectations,” Fitzgerald said. “Second, some write-downs have simply been pushed forward, as external factors, including low interest rates, have enabled banks to push off distress into the future.”

In part because of that delay, the IMF report forecasts real estate loan charge-offs are still expected to increase in 2010 and may not peak until 2011.

“What are the implications for commercial real estate investors?” Fitzgerald asked, then answered: “The banks supply approximately 50% of all debt capital to the sector, so lending capital could be constrained for some time. However, there is a bright side. If we continue to follow our current path, and distressed assets bleed slowly into the market over time, then healthy lenders may have enough capacity to meet low transaction volumes (especially with depressed pricing). The large banks that have recently reported healthy earnings (primarily due to their trading and fixed-income operations) are a potential source of capital, and these banks have historically been under allocated to commercial real estate compared to the overall banking sector.”

However, Fitzgerald added: “On the other hand, if an external factor pushed more distress into the marketplace (i.e. major interest rate increases, changes in regulator behavior), this could create significant opportunities for opportunistic investors.”

What follows are recent comments and reports from specific large and medium-sized bank and bankers regarding current commercial real estate portfolio and market conditions and market outlooks. The statements come from first quarter earnings reports, earnings conference calls and monthly banking condition filings with the U.S. Department of Treasury and are believed to be relatively indicative of what most banks reported.

Better To Let a Project Work Out than Foreclose

On the commercial side, CRE non-accrual loan inflows actually declined 27% in the first quarter, but it is typically in everyone’s economic interest, including ours, to write the loan down to continue to have the developer work the project for us rather than foreclose. The process of structuring and executing these solutions can take several quarters to complete, and throughout this process, these loans are closely monitored, collaterals are re-evaluated and if necessary loss content is recognized.

John Stumpf – Chairman, President and CEO of Wells Fargo & Company

Heading in the Right Direction

When you talk about the uptick in commercial real estate charge offs and nonperforming asset inflow, I think it’s important to put it in proper context to remember our overall credit trends. We’ve seen improvement for three quarters now in charge offs, nonperforming asset inflows and past dues and we’ve seen improvement for two quarters now in overall nonperforming assets, provision and the watch list…. We saw that the commercial real estate watch list was down by $100 million in the first quarter and then we analyzed the commercial real estate migration for the last several quarters and all those items supported our belief that the negative migration is receding. That being said, there’s still a lot of work to do on commercial real estate as you can see from the absolute numbers. While we think there may be variability as we certainly saw this quarter, and as we said in prior quarters, we think the overall trend is going in the right direction.

John M. Killian, Chief Credit Officer, Comerica Inc.

REITs Driving New Borrowing

In February, new commercial real estate (CRE) loan commitments totaled $132.4 million, compared with $47.4 million in the previous month. The increase in new commitments was driven by substantial capital raising activities undertaken by some of Citi’s REIT clients, which issued both new equity and longer-term debt to strengthen their balance sheets.

Citigroup in the latest Monthly Treasury Intermediation Snapshot

Short Hold Period for Foreclosed Assets

Excluding $243 million of nonperforming assets (NPAs) in our held-for-sale portfolio, where the loans have already been fully marked, portfolio nonperforming assets totaled $3.1 billion. Portfolio non-performing loans were down over $200 million sequentially, a 7% decline, while other real estate owned (OREO) was up about $100 million largely commercial OREO. That was a really positive move for non-performing loans and as you would expect we are seeing some continued growth in OREO, which represents the combination of treatment strategies on problem loans, with those typically having moved into non-performing status in the year ago timeframe. I would note that only 10% of our OREO has been carried as OREO for more than 12 months.

Mary Tuuk, Chief Risk Officer, Fifth Third Bancorp

Fifth Third continues to monitor the CRE portfolios and continues to suspend lending on new non?owner occupied properties and on new homebuilder and developer projects in order to manage existing portfolio positions. We feel this is prudent given that we do not believe added exposure in those sectors is warranted given our expectation for continued elevated loss trends in the performance of those portfolios.

Fifth Third in the latest Monthly Treasury Intermediation Snapshot

Material Liquidity Coming Back into the Market

I’m not sure that I would necessarily call it seasonality but clearly the quarter started more slowly in January and early February, and there was a real crescendo through March in terms of sales activity… We started seeing some material liquidity coming back into the market in the second half of the first quarter and that’s not seasonal. That is real and it is I think reflective of a recognition that number one, there’s a lot of money out there that’s been looking for somewhat better trends in commercial real estate in particular and are beginning to see it. So we’ve seen a great improvement.

Chuck Hyle, Chief Risk Officer, KeyCorp

KeyCorp’s lending strategies remain focused on serving the needs of existing and new relationship clients while being mindful of risk?reward and strategic capital allocation. There was no change in underwriting standards in February. There was no change in loan demand trends in the CRE segment during February. The CRE market outlook continues to be weak. All new commitments originated in February were attributable to the middle market portfolio. During February, KeyCorp continued to extend and modify existing credits given the lack of liquidity and refinancing options available in the CRE market.

KeyCorp in the latest Monthly Treasury Intermediation Snapshot

A Bifurcated Market

Class A properties are doing well and probably are doing better than anybody might mark them, so actually we’re not in the business of selling those even though we might have taken a mark on them when we took them in. Those properties tend to come back with the economy, and that’s the right thing to do.

The C properties, you just sell. C property rarely comes back so you take very strong marks on those right up front and you just sell them because they always have trouble recovering at all. So we’ve been actively doing that and we’re comfortable with our marks.

The B properties, obviously the majority of the portfolio, but those are the ones you mark down and you have to manage one by one… So that’s a plus, and I think the commercial real estate business over time, if a property loses a tenant, clearly that property has less value as you know. But then they go resign somebody else at a lower lease rate, so the property is worth less, but it’s not like it falls off the planet. There is some cash flow. So I think those B properties, I think will work their way through for the most part.

James Rohr, Chairman & CEO, PNC Financial Services Group Inc.

Ramping Up Owner-Occupied

We continue to produce our concentration of nonowner-occupied commercial real estate. We currently have $1.4 billion in nonowner-occupied commercial real estate and $630 million in owner-occupied commercial real estate. At quarter end, nonowner-occupied commercial real estate is down to approximately 45% of our total loan portfolio.

Based on where we ended the first quarter, we’re now projecting loans to be down approximately 5% to 8% the full-year and are optimistic that we might see some additional lending opportunities in the second half of year that may help us offset some of these decrease.

We have recently implemented an aggressive calling program for our bankers to actively pursue commercial industrial loans, owner-occupied commercial real estate consumer loans and residential mortgage loan opportunities. Despite low loan demands, we still manage the book over $209 million in new loan commitments during the first quarter. Anecdotally, we’re hearing from some of our customers that business had begun to pick up. However, we have not yet seen evidence of that in increased line usage or loan demand.

The sector within commercial real estate, which has experienced the most stress, has been hospitality… Over the last 15 months, the industry has experienced significant declines in occupancy of rates, average daily room rates and revenue per available room. As a result of this deterioration, we charged-off approximately $9 million against the allowance for credit losses associated with this loan portfolio during 2010… We’re in the process of finishing up a thorough review of this entire portfolio.

J. Downey Bridgwater, Chairman, President & CEO, Sterling Bancshares Inc.

Growing Interest in Bank-Owned Properties

While commercial real estate administration and problem loan disposition continue to be quite challenging… we are starting to see increased inquiries and activities in the movement of some troubled commercial real estate. We had a large OREO sale in the first quarter, it was good to see and really the focal point of my comments about being some movement and some activity in the OREO account. As you might imagine, there is a lot of multi-activity there. We have some properties coming in and some properties going out. We are continuing to value those properties each and every month to make sure that we have got an accurate balance based on the market value that we are carrying on our books.

But during the first quarter I am very pleased, we saw a number of, besides that large sale, we saw a number of sales to small properties throughout the quarter both on some commercial properties, some residential properties, amounts that made us approach that comment there about the activity in the marketplace, and there continues to be some offers and some interest heading into the second quarter. Whereas six months ago, nine months ago, a year ago, there was not a whole lot of interest in bank owned properties, we are starting to see some activity and some movement there as I indicated.

Bob Kaminski, Executive Vice President & Chief Operating Officer, Mercantile Bank Corp.

Dealing with Construction Loans

The increase in the term commercial real estate loans is only partially a result of the decrease in the construction loans. We do have some construction loans that are moving to term loan because the properties are leasing up and they are qualifying. We have fairly strict standards for moving a loan from construction to term. They basically need to qualify as though they were being originally underwritten as a term loan before we move them into that category.

Doyle Arnold, Chief Financial Officer, Zions Bancorporation

Los Angeles Office Update – 1st Quarter – 2010

Los Angeles Office Update – 1st Quarter – 2010

West LA Office Market Highlights:

Total Vacancy – 15%  – About 152,000 of the Yahoo! sublease in Santa Monica went vacant in the first quarter

Direct Current Monthly Lease Rate:  $3.45/FSG

Net Absorption (Negative)  -248,232 sq. ft.  (Approximately 100,000 of negative absorption was in Century City with HBO vacating)

This is the highest overall vacancy rate in West LA since the second quarter of 2004


Los Angeles Office Market, as a whole:

During the first quarter 2010, the Greater Los Angeles office market experienced a direct vacancy rate jump from 14.8% at the end of the fourth quarter 2009 to 15.3%. The overall vacancy rate, which includes sublease space, also increased from 16.6% to 17.1% over the same period, the tenth straight quarterly increase.  As a result, seven of the nine submarket areas in Greater Los Angeles witnessed negative net absorption for the quarter with four of them totaling more than negative 200,000 square feet. This represented the eleventh straight quarter with negative net absorption in the LA office market.

Current Sub-Market Overall Vacancy Rates (Direct and Sub-Lease):

Downtown:   17.4%

Hollywood/Wilshire Corridor:  15.6%

San Fernando Valley:  20.8%

South Bay:  18.1%

West Los Angeles:  15%


Other Stats:

The unemployment rate in Los Angeles County was 12.3% in February 2010, compared to a rate of 12.8% for California and 10.4% for the nation.
At the end of the first quarter 2010, the overall vacancy rate in Greater Los Angeles increased for the tenth straight quarter totaling 17.1%.
The weighted average asking lease rate for office space in Greater Los Angeles dropped during the first quarter to $2.45, a 2-cent decrease compared to the fourth quarter 2009.
Net absorption during the first quarter of 2010 totaled nearly 966,000 square feet of negative activity in Greater Los Angeles.

Is The United States Headed For A Commercial Real Estate Crash Of Unprecedented Magnitude?

Will commercial real estate be the next shoe to drop in the ongoing U.S. financial crisis?  While most eyes are on the continuing residential real estate disaster, the reality is that the state of the commercial real estate market in America could soon be even worse.  Very few financial pundits are talking about this looming disaster but they should be.  The truth is that U.S. commercial property values are down approximately 40 percent since the peak in 2007 and currently approximately 18 percent of all office space in the United States is now sitting vacant.  That qualifies as a complete and total mess, but the reality is that the commercial real estate crisis is just starting.

Continue reading “Is The United States Headed For A Commercial Real Estate Crash Of Unprecedented Magnitude?”