Distressed Commercial Property Offerings Rising, Report Says
Bloomberg reports: March 24 (Bloomberg) -- About $11 billion of defaulted or foreclosed commercial properties were being offered for sale last month as landlords struggled to refinance loans, Real Capital Analytics Inc. said.
About $5.7 billion worth of properties defaulted, were foreclosed upon or entered bankruptcy in February, the New York- based research firm said in a report today.
The situation “is likely to only worsen over the near term since behind the statistics are sellers that are rapidly morphing from pressured to distressed, while buyers are content to wait,” Real Capital analysts said.
With U.S. unemployment at 8.1 percent, the highest in a quarter-century, and more than 100,000 people and companies filing for bankruptcy in February, commercial property defaults are poised to rise. That may lift the vacancy rate at office buildings to 16.7 percent this year from 14.5 percent at the end of 2008, analysts at New York-based Reis estimate.
Real Capital said $8.8 billion of U.S. office properties are distressed, or about 211 properties. The list is growing by about 30 properties a month, the report said.
Real estate investment trusts including Vornado Realty Trust as well as private high-yield investment funds are raising cash to buy property from overextended owners.
The ratio of offerings to sales is now almost 5 to 1 this year. In 2005, it was 2 to 1 and in 2006 it was 1 to 1.
With so many properties on the market, owners are cutting prices, Real Capital said. Office buildings are selling for 91 percent of their original asking prices, down from 94 percent at the market’s 2007 peak, the company said.
“An influx of more realistic and distressed sellers may also serve to break the stalemate that has brought sales to a halt,” the researchers wrote.
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Posted by: Nina Turner