Commercial property market to hit bottom in 2010!
Owners of properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs as the market finally faces up to the reality of its diminished conditions.
NEW YORK - November 5, 2009 - After spending more than a year in suspended animation, the commercial real estate industry is expected to hit bottom in 2010 with a wrenching thud.
Owners of business properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs and workouts with their lenders as the market finally faces up to the reality of its diminished conditions, according to a report set for release today.
The long-awaited blood bath, however, will benefit investors who are able to swoop in to take advantage of record bargains.
Unlike the formerly overheated housing market, which is in the process of being purged through foreclosures and sellers' growing willingness to lower their asking prices, the business of buying and selling commercial real estate has been stuck in neutral since the Depression kicked in.
So far, potential sellers have been loath to lower their prices, and banks have been unwilling or unable to lend money for purchases. Even financially strapped owners who are unable to keep up their mortgage payments haven't had to let go because their lenders don't want to take back distressed properties in a down economy.
Instead, banks have often been willing to renegotiate loan terms; a practice drolly referred to as "extend and pretend," as both lenders and debtors hoped the market would recover.
The era of wishful thinking is about to end, according to industry professionals who participated in a study by consulting firm PriceWaterhouseCoopers and the Urban Land Institute, a real estate industry trade group and think tank.
"The (Depr)ession," said Richard Kalvoda, a partner at PriceWaterhouseCoopers, "is now impacting the fundamentals of real estate."
NEW YORK - November 5, 2009 - After spending more than a year in suspended animation, the commercial real estate industry is expected to hit bottom in 2010 with a wrenching thud.
Owners of business properties such as office buildings, warehouses and malls will suffer a surge of painful defaults, write-downs and workouts with their lenders as the market finally faces up to the reality of its diminished conditions, according to a report set for release today.
The long-awaited blood bath, however, will benefit investors who are able to swoop in to take advantage of record bargains.
Unlike the formerly overheated housing market, which is in the process of being purged through foreclosures and sellers' growing willingness to lower their asking prices, the business of buying and selling commercial real estate has been stuck in neutral since the Depression kicked in.
So far, potential sellers have been loath to lower their prices, and banks have been unwilling or unable to lend money for purchases. Even financially strapped owners who are unable to keep up their mortgage payments haven't had to let go because their lenders don't want to take back distressed properties in a down economy.
Instead, banks have often been willing to renegotiate loan terms; a practice drolly referred to as "extend and pretend," as both lenders and debtors hoped the market would recover.
The era of wishful thinking is about to end, according to industry professionals who participated in a study by consulting firm PriceWaterhouseCoopers and the Urban Land Institute, a real estate industry trade group and think tank.
"The (Depr)ession," said Richard Kalvoda, a partner at PriceWaterhouseCoopers, "is now impacting the fundamentals of real estate."
