Don't Celebrate Yet: Hundreds of Markets Beyond New York Still in Trouble
Friday, May 13, 2011
Source: Reuters
Reuters reports: “Some marquee properties in major U.S. cities recently have sold at high valuations, leaving many investors celebrating the commercial real estate sector's comeback. But not everyone's been invited to the party.”
In other words, for most commercial properties in the US, which lie outside of the highly-visible, primary markets, property values remain significantly depressed after the most recent downturn. They await the type of macro-economic and employment growth currently returning to the nation’s leading metros to begin posting improvements themselves. According to the Moody’s/REAL Commercial Property Price Index, which is based on repeat—sales data from Real Capital Analytics, pricing for commercial properties in Manhattan and Washington, DC are just 17 percent and 18.5 percent off their historical highs, respectively.
What is even more concerning, Reuters pointed out, is that, “If property values in weaker markets, such as Cincinnati or Indianapolis, don't improve before the loans come due, many borrowers will be forced to default. Community banks tend to have the biggest commercial property holdings as a percentage of overall assets, so mass defaults could cause scores of those lenders to fail.”
Regarding whether these secondary and tertiary cities will be able to pull it out before its too late, Reuters quotes RCA’s Ben Carlos Thypin as stating emphatically that, “There's no chance that property values will rise enough.”
View the full article on Reuters: Don't Celebrate Yet: Hundreds of Markets Beyond New York Still in Trouble
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Posted by: Nina Turner