Grim reality still grips US commercial real estate

* Current conditions index at 56 out of 100

* 77 percent say property values down from a year ago

* 71 percent say things will be same or worse in 12 months

By Ilaina Jonas

NEW YORK, Nov 2 (Reuters) - Executives do not expect the
U.S. commercial real estate market to emerge from critical
condition any time soon, according to a survey by The Real
Estate Roundtable.

Although the three indexes tracked by the "Sentiment
Survey" have risen dramatically since the near-collapse of
financial markets last year, they reflect the respondents'
collective sense of relief at having survived the worst of the
turmoil, according to The Real Estate Roundtable.

The U.S. commercial real estate market has been in a
downward spiral for more than two years. On the whole, U.S.
commercial real estate values have fallen about 40 percent from
their peaks in 2007. Borrowers face shortfalls in financings
when loans come due, while other borrowers are struggling to
meet even monthly payments.

The delinquency rate of U.S. commercial real estate loans
that had been securitized into Commercial Mortgage-Backed
Securities (CMBS) hit 4.8 percent in October, up from 4.36 the
prior month and dwarfing the 0.77 rate a year earlier,
according to Trepp, which tracks CMBS loans.

The Roundtable is a trade group that has been advocating
for government policy changes to help jump-start the sector. It
has urged policymakers to adopt its "Five-Point Liquidity Plan"
which includes changes in tax rules that will allow more
foreign investment and improving the Term Asset-Backed Lending
Facility's (TALF) ability to foster new issuance of commercial
mortgage-backed securities (CMBS).

According to the Roundtable's survey, U.S. property
executives rate "current conditions" a 56 -- well below the
ideal of 100.

An overall index of 100 would mean that respondents believe
present conditions are "much better" than a year ago, and will
be "much better" 12 months from now.

"The problems now are more clearly defined and there's a
grim sense of reality setting in, but that's a long way from
saying markets are stabilizing or that conditions are on the
mend," Roundtable President and Chief Executive Jeffrey DeBoer
said in a statement.

Policymakers need to restore credit availability, address
the equity shortfall resulting from falling commercial property
losses, and foremost help create jobs, the Roundtable said.

About 77 percent of the more than 100 commercial real
estate executives surveyed said property values are lower than
a year ago.

Although that was down from 93 percent the previous
quarter, it was far from optimistic. Seventy-one percent of the
respondents said they expected values to remain "about the
same" or to erode even further in the next 12 months.

As far as financing sources, 28 percent of those polled
said credit availability is worse today than a year ago,
compared with 71 percent who said so in the previous quarter.

The percentage that characterized equity availability as
worse today than a year ago also dropped significantly -- to 17
percent from 55 percent in the prior quarter. However, 95
percent expect debt market conditions to be at least the same
or better 12 months from now.
(Reporting by Ilaina Jonas, editing by Matthew Lewis)