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Promus Commercial Real Estate NewsFebruary 2010Whither Goes Commercial Real Estate?
“First, commercial mortgages are about to hit a refinancing wall. Deutsche Bank estimates that more than 65% of the loans that have been packaged into commercial mortgage backed securities won't qualify for refinancing when they come due. Second, banks are already facing painful choices about what to do with short-term land and construction loans that will never be paid off in full. Finally, the vulture investors who usually swoop in and refire markets after a bust are still hanging back.” Hans Ganz, CEO at Pacific Trust Bank, agrees in the San Diego Business Journal. “The worst is yet to come. (There are) ongoing problems in the commercial real estate markets that will result in more red ink and more bank failures. Lenders whose loan portfolios are carrying high concentrations of loans backed by commercial real estate will have a rough year.” Still, it’s not all gloom and doom. Green Street Advisors, who showed how San Diego may largely avoid the pain of a $1 trillion “tidal wave” of commercial foreclosures throughout Southern California, has released a study showing property values have now risen by about 9% since hitting a trough in May ’09 (though they still remain 33% below their ‘07 peak). Transaction volume is low, but Mike Kirby, Green Street's Director of Research, says; "The good news is that pricing definitely firmed up in the latter half of '09, especially during the last quarter. Sellers are feeling less pressure to act, the outlook for fundamentals has become clearer, and well–capitalized buyers are becoming plentiful." What the Future HoldsLauri Greenblatt Hines, CPM, CCIM
That the commercial real estate market has been dealing with these kinds of results for the past couple of years won’t be a shock to anyone who’s been paying attention. But the real question is what’s coming next? “The word on the street is the buildings have lost 30-40% of their value from the peak a couple of years ago,” observes David Marino, Executive VP at Irving Hughes, Inc. His experience is buttressed by the words of Dan Ryan, principal at Veralliance Properties, who notes: “Guys are in shell shock from how quickly the market has deteriorated. Perhaps 2010 will be the year when color returns to their faces.” “Many businesses are using today’s low prices to move up to quality space,” says Alan Nevin, Director of Economic Research for MarketPointe Realty Advisors. He sees firms taking advantage of low leases and reduced building costs to make new transactions before the economy turns around. “Often they can get more space for less than what they were paying previously,” Nevin adds. As for new construction, the industry consensus seems to be to not expect much for the foreseeable future – perhaps as much as two years. “There is really no new private development,” says Dennis Cruzan of Cruzan/Monroe – a commercial real estate developer. From where he sits, it makes more sense to buy existing properties than to try to rationalize new development. So…is there anything to smile about? Mr. Nevin suggests there is. “Our industrial users for the most part are local, and space will be filled up. It will probably take another two years or so to get back to some degree of normalcy. There is nothing new being built. As a result of that, it will not be that difficult to fill up the space. We will recover and it will not take that long.” Which means maybe…just maybe…2010 won’t be such a bad place to be after all. But just in case, we are advising clients to “Hunker Down til '12 Comes Round.” For a private assessment of what the future holds for your commercial real estate investments, contact president Lauri Hines directly Buying? Selling? Now What?
Learn why our best days are still in front of us… Helping Receivers Generate Cash Flow
All without missing a beat in their core business. The principals of Promus Commercial have spent close to 30 years years anticipating and resolving every imaginable challenge a commercial building owner, investor or association could face. Which is why Promus provides - under one roof - the ability to stabilize and manage any commercial building that you may have in your portfolio. We’re particularly good at managing non-performing loans! Known for exceeding Southern California real estate standards with a seasoned management team that has many years in the real estate field, Promus is universally recognized as THE firm to turn to first in both commercial and investment real estate. Our expertise covers locally, nationally, and internationally-based private property owners and financial institutions, and includes turn-key building management and leasing services for Receivers and Bankruptcy Trustees. And we’ve consistently provided the highest quality on-the-spot responses to emergency needs, maintenance oversight, marketing, HR, operations, systems, strategies and client communications. With our many years of experience participating in receiverships, Promus thoroughly understands your business:
Promus clients know our breadth and depth of experience provides a comfort level that’s difficult to duplicate. They consistently find our expertise ensuring their success, regardless of the situation they encounter at a commercial property. Which is why, as receivership opportunities beckon, you’ll want to contact president Lauri Hines directly at 858-751-6331 to use the resources and experience that only comes from decades of working knowledge. You’ll see how easy it is to generate the results you need.
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TIME Magazine
Downsizing. Restructuring. Prime space going begging.
To nobody’s surprise, there are BIG changes happening in the structure of the region’s real estate markets, and commercial properties are not immune to these shifts. Prior to any transaction, industry specialist Gary London recommends you do the following:
Commercial receivers face a series of basic challenges: |
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