Survey: US Property Faces Long Road to Recovery
Friday, December 18, 2009
Source: Reuters
Reuters reports: With Washington policy-makers increasingly pulling the strings that affect prices, US commercial real estate faces a long, slow road to recovery that is more than a year away for most types of property, according to a survey commissioned by PricewaterhouseCoopers.
According to the fourth-quarter Korpacz Real Estate Investor Survey, the recovery of commercial real estate is not expected to gain much traction until late 2011 or 2012, given current prospects for a lackluster economic revival in the United States and high unemployment.
Rental rates will continue to decline until strong, consistent job growth resumes, according to the survey. With $1.4 trillion of commercial real estate debt maturing by the end of 2012, some property owners will not be able to survive the downturn. Problems related to refinancing that debt could further delay a recovery in the sector, the survey said.
More than one hundred property investors were surveyed, representing the views of real estate investment trusts, pension funds, private equity firms and insurance and mortgage companies.
Pricing in the industry will be more influenced by government and regulatory policy than by occupancy levels or rents, said the founder and president of Real Capital Analytics, Robert White.
Policy makers control what happens to commercial mortgages in default, White wrote in the report, and have encouraged loan modifications and extensions even in cases where loans are above a property's current value.
Tax policy, meanwhile, has made it easier for special servicers to negotiate with borrowers, a move meant to prevent a wave of maturity defaults and property fire sales. Keeping rates low and easing restrictions on foreign capital will also influence industry prospects.
CMBS held about 42% of distressed loans, US banks 31% and international banks another 13%, at the end of November, Real Capital Analytics said.
View the full article on Reuters: Survey: US Property Faces Long Road to Recovery
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Posted by: Matthew Stone