Commercial Real Estate Metrics Considered Healthy

Real-Estate Financier's Death Hints At Trouble for Lenders

“[Late] real-estate financier Scott Coles’ Mortgages Ltd., [was] one of Arizona's biggest private lenders during the real-estate boom. It specialized in short-term, high-interest-rate loans to commercial developers -- builders of malls, office parks, condominiums and other projects -- who either had bad credit or a need for quick cash with no red tape. But he overreached, and the debacle that has devastated the U.S. housing market the past year is now squeezing Mortgages Ltd… Mortgages Ltd. and other lenders are reporting a significant jump in loan defaults. That's placing enormous new pressure on the lenders, which have bet billions of dollars on new construction of commercial properties.” (Wall St. Journal, July 16th)

Too Many Malls, Too Few Tenants

“With the economy slumping and shoppers spending less, retailers that had flocked to… lifestyle centers, [or] open-air shopping venues … have begun canceling expansion plans and even shutting stores. Others… have sought bankruptcy protection. This couldn't happen at a worse time for lifestyle-center developers, which were putting up more of the shopping centers than ever. Market-research firm Portfolio & Property Research Inc.: Last year they built 37 centers totaling some 12 million-sf, or roughly 40% of the total lifestyle-center square footage added this decade. Double the 2007 total is now under construction, and three times as much is in the planning stages.” (Wall St. Journal, July 17th)

CoStar Group, Inc. Q2 2008 Conference Call Transcript

“[Q2] conditions for the office, retail and investor, real estate sectors [in the U.S.] remained mixed, but many of the most important metrics are well within range of conditions considered healthy... Clearly, it appears that the transaction activity has slowed especially on the sales side. However... Rents are generally at multiyear highs. Construction activity is robust. Vacancy rates have risen, but are generally moderate across the majority of markets and well within the ranges considered healthy… Capital for commercial real estate, both equity and debt remains reasonably available under the terms in 2008, especially compared with the true downturns we had in our early 90’s.” (Seeking Alpha, July 16th)