Wednesday, June 9, 2010

Los Angeles Times: "Commercial Property Rebounding" -- Sidelined Capital Seeks Deals -- Foreclosures Fail to Materialize

Commercial real estate pundits and investment property soothsayers take heed: the commercial real estate market may be in the course of bottoming out, and the long-predicted commercial real estate crash may never come to pass.

According to today's Los Angeles Times, with prices down and the forecasted wave of foreclosures failing to materialize, investor interest is rising. Rafts of cash that has been earmarked for better days is now coming into the market, driving up prices.

Although commercial building landlords in many markets are still struggling with high vacancy rates and weak rents, the erosion in some sectors has slowed, piquing the interest of buyers. In addition, reinvigorated banks have been able to postpone or avoid liquidating billions of dollars' worth of distressed real estate loans sitting on their books, helping to solidify prices.

In a similar fashion, Southern California's housing market hit bottom more than a year ago and prices have been trudging higher ever since, partly because a feared wave of fresh foreclosures hasn't materialized.
According to research by MIT, commercial real estate prices are 41% below mid-2007 peaks, and the industrial and multifamily sectors are not moving sideways, but are experiencing price increases as competitive bidding resumes.

Have the vultures found their quarry? Not really. As banks extend and rework loans for landlords in trouble, distressed assets have been few and far between. Those speculators, investors, and owner-users who have been (rightly) timid to re-enter the murky commercial real estate waters, should perhaps don a new outlook, brush off their checkbook, and start looking for some "smokin'" deals.