By Ilaina Jonas
NEW YORK (Reuters) - Commercial real estate markets in many parts of the world are falling and in the United States, the largest market, things are poised for a deep, lingering dive, experts said.
"I've never seen the sector get so tied up in knots as it is right now," Jacques Gordon, global strategist and head of Research for LaSalle Investment Management, told the Reuters Real Estate Summit this week.
Commercial real estate markets around the globe are facing debt repayment issues, declining values, and deteriorating rents and occupancies in different combinations.
Prices are resetting lower at different speeds and magnitudes country by country.
"The UK is way out ahead," Gordon said. "We do not see the U.S. teed up to be the number two in the re-pricing process. We are seeing Australia, even signs of Japan and Germany out ahead in terms of re-pricing."
But in the United States, commercial real estate players -- buyers, sellers, and lenders -- have been taking other avenues to avoid selling at prices most experts believe are half of what they were at their peaks in 2007.
Commercial real estate sales worldwide in the second quarter are expected to be off 67 percent from a year earlier, according to research firm Real Capital Analytics, with U.S. volume down 83 percent.
Lenders have been reluctant to foreclose because financing for sales is scarce and instead are extending loans.
"If you can't sell a property why not extend?" said Richard Parkus, head of Deutsche Bank Commercial Mortgage-backed Securities and Asset-Backed Securities Synthetics Research.
Some borrowers whose generous loans included interest reserves are hanging on to their property for now.
"A lot of these deals will have interest reserves that will take them through 2010," said Darcy Stacom, vice chairman of CB Richard Ellis Group Inc (CBG.N: Quote, Profile, Research, Stock Buzz).
Still, others who have seen their rental revenues fall are safe for now because their loans were based on LIBOR, which has plummeted.
"You've got deals that were supposed to be paying $15 million of interest paying $4 million. Stacom said. "They're alive."
The holdout by borrowers has vexed potential buyers looking for distressed deals, said Stacom, one of the top commercial real estate brokers in New York.
"Investors are incredibly frustrated," she said. "We have virtually nothing in the supply pipeline of just direct distressed deals." Continued...
© Thomson Reuters 2009. All rights reserved.
| Autos | Nov 02 - 4, 2009 | Autos |
| Middle East Investment | Oct 26 - 28, 2009 | Country Summits |
| Washington | Oct 19 - 21, 2009 | Country Summits |
| Global Wealth Management | Oct 05 - 7, 2009 | Financial Services / Exchanges |
| Restructuring | Sep 29 - Oct 01, 2009 | Financial Services / Exchanges |
