RCA in the commercial property press:

Real estate's woe zone

The Denver Post reports: Over the past year, the amount of commercial real estate trading hands has plummeted and values have dropped, leaving many owners with assets they can't sell.

In many instances, loans are coming due and those owners are unable to refinance because of the banking meltdown.

"We've gotten through most of the pain in residential real estate, but the pervasive feeling in the financial markets is we haven't seen all of the pain in the commercial real estate market," said Jeff Thredgold, an economist with Vectra Bank Colorado. "There is a fair amount of distressed properties around the country that has to be dealt with, and there is a fear of the unknown that has led to a decline in major transactions."

During the 12 months ending March 31, transaction volume across all property types in metro Denver dropped 75 percent to $1.5 billion, compared with $6.2 billion during the same period last year, according to a report complied by LoopNet, a commercial real estate information services provider.

Those deals that are getting done are commonly smaller properties financed with private equity.

Nationally, the volume of commercial deals dropped 70 percent to $110.4 billion in the 12-month period ending in the first quarter, from $371.4 billion a year ago.

Still, Denver is faring better than markets such as San Francisco, Los Angeles and Phoenix, where home values plunged after peaking in 2006. Total commercial deals in San Francisco plummeted 91 percent to $1.3 billion during the 12-month period, and in Las Vegas and Phoenix, they dropped 82 percent to $696 million and $1.5 billion, respectively.

"Commercial property transactions are at the lowest point we have seen this decade, which makes sense given the economic uncertainty and difficult lending environment," said Dan Fasulo, managing director of Real Capital Analytics, a New York-based commercial real estate market research firm that provides the data for the report. "Real estate is an industry that relies on debt in its normal course of daily business, and when lending tightened up, there was no question that transactions were going to fall significantly."

Commercial real estate loans aren't likely to have as big an impact on the banking industry as residential mortgages have, Fasulo said.

"Commercial property loans will affect banks on a one-off basis where bad bets were made, but I don't foresee any systemwide troubles in our future because of this," Fasulo said.