Commercial Real Estate Report
The following information was inserted directly from an email I received today from the Federal Reserve Bank of San Francisco, the Banking Supervision and Regulatory Division. The essence of the report is that the market has become more tense than six months ago, but opportunities still exist.
As you read this, stay focused and open-minded. You may have to read it twice, just like me, to get the “right one.” For those who want to get a full report, email me. As my regular readers know, I don’t usually copy or paste other people’s reports, but it needs to be read.
The state and outlook of the CRE market
Summary of the guide
o Market Key And Prospects: Commercial Real Estate Prospects (defined in this report as income ownership) are deteriorating due to the economic downturn, the continuing paralysis of the credit market, broad CMBS spreads and more expensive financing of CRE operations and projects.
CRE real estate sales have plummeted, funding has become harder to obtain, and it has become more expensive. The vacancy rate is rising and rent growth is slowing as economic growth slows.
CRE markets will continue to weaken, but they must avoid a housing collapse.
CRE markets are not as built up as they were in the late 1980s. For example, the office completion rate (as a percentage of the existing fund) was at least 1.4 per cent in 2006 and 1.7 per cent in 2007, compared with the average. annual rate of almost 6% in the 1980s.
Supply and demand remain fairly balanced, and the vacancy rate is expected to increase moderately as demand from tenants declines next year, but only to levels below 2001-2002.
Rent growth is expected to remain positive in most local markets, with rents falling from rent in 2002-2003.
PS: The special reports I’ve been referring to over the past thirty days have been completed. Our new site for our book is no more than a week old. So if you need ten secrets that your lender doesn’t want you to know about, email me and we’ll be able to get ten free reports by Monday. You must confirm the reverse letter to sign up for this special delivery.