Commercial Real Estate Will Hit Bottom in 2010, Report Says

A surge in defaults is expected for landlords of malls, office buildings and warehouses, according to a report by PriceWaterhouseCoopers and the Urban Land Institute.

A study released Nov. 5, 2009 by PriceWaterhouseCoopers and the Urban Land Institute predicts the commercial real estate industry will hit bottom in 2010. By that time, commercial property values will have lost 40 to 50 percent of their value from their peak value in mid-2007, the biggest drop since the Great Depression.

A surge in defaults is expected for landlords of malls, office buildings and warehouses, according to the report. Retail and office properties will take the biggest hits, as consumers curb spending and companies delay rehiring.

Waiting in the wings are cash heavy real estate fund managers to grab up distressed properties.

The report anticipates a much better commercial real estate market three years out. Hotels, particularly hard hit, can bounce back quickly when the economy improves. Office buildings, dependent on hiring, and malls, dependent on consumer spending, will take longer to recover. Apartments will probably recover first. The Wall Street Journal reported Nov. 18 that Fannie Mae and Freddie Mac commercial real estate loans are hurting the apartment sector. ?EUR??,,??One-quarter of the $180 billion of apartment-building loans on Fannie?EUR??,,??s books ?EUR??,,?? account for nearly half of all its commercials-loan delinquencies,?EUR??,,?? said the WSJ.