From Sperry Van Ness Accelerated Marketing | John Johnson, CCIM — Interesting how some “experts” are predicting a recovery in the commercial real estate arena. Those who have been closely following the CRE market for any time must wonder what tea leaves the editors of these three sources are reading. Perhaps they are not aware of the bifurcation that has been occurring in the CRE market for the past 6 - 8 weeks, with cap rates dropping for the highest quality NNN leased properties, but other commercial real estate prices still dropping. How could they have missed the fact that close to $1 Trillion of commercial real estate loans are coming due between now and the end of 2012? Read and draw your own conclusions. From Retail Traffic Magazine:
This is what makes following commercial real estate so maddening.
Less than a week ago, Forbes had a post looking at the big storm brewing in commercial real estate. And the phrase “next shoe to drop” was still being tossed around.
Yet in the last few days articles have appeared at Time, MSNBC and Fortune boasting about various aspects of a brewing commercial real estate recovery. John Reeder over at Marketwi.se warns us that this might be a reason to worry given the mainstream media’s track record of calling booms or busts at exactly the wrong times.
Time’s piece appeared first. It’s an interview with Mike Kirby, chairman of Green Street Advisors, that asks if commercial real estate is bouncing back.
This whole premise that commercial real estate is “the next shoe to drop” is overstated. Clearly, we have problems, since there are many mortgages out there that were underwritten using very aggressive assumptions, and those will be difficult to refinance. But the good news is, if you look at our property index, we’re back to 2005 pricing. So that means that most properties that were financed in ‘04 and ‘05 are not going to be much of a challenge to get refinanced. And, yes, the ‘06 and ‘07 deals, which some indices say are still underwater, will also need to be recapitalized. The good news is, there’s a very long line of capital sources that have shown up in the last nine months that are ready, willing and able to play that role.
Fortune’s piece came next, showing up yesterday afternoon. Its piece looked at how the CMBS market has exhibited some vitality lately (something we’ve noted as well). What’s been most remarkable about the CMBS recovery is that many people thought that the old model would have to be modified in some way for CMBS to come back. But that’s not been the case. Nor has the intervention of the federal government been as essential to the process as some had thought.
The piece is interesting and traces how the recovery of the CMBS sector has unfolded through a series of fortuitous occurrences, shifts in strategies and the emergence of buyers for bonds that previously may not have been so interested in the sector.
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Tags: capital, CMBS, commercial, Commercial Real Estate, Fed, financing, market reports, mortgages, property index, real estate, reports