Financial uncertainty slowing down commercial real estate

New York /
Sep.September 21, 2011 12:50 PM

Uncertainty in the financial market has begun slowing down a two-year
rebound in the commercial real estate industry, the Wall Street
Journal reported, with companies that had been looking for large chunks of
office space now delaying their plans. As the article notes, fashion
designer Tommy Hilfiger’s plans to convert the Metropolitan Life clock
tower, a 1909 office building near Manhattan’s Madison Square Park,
into a hotel and luxury condo collapsed this month after Hilfiger
and his investment partner weren’t able to secure enough financing.

Some investors say that the recent turbulence is not more than a bump
in the road before commercial real estate values resume their upward
march toward near-peak levels in areas such as New York and
Washington. Top buildings in major cities still are attractive to many
investors because of ultralow interest rates, prices and rents near
the top in high-end retail.
“We’re still optimistic about the recovery,” said Marc Halle, a
managing director at Prudential Real Estate Investors, a Prudential
Financial unit that is a major commercial property investor.
“Obviously, the events of the past few weeks have slowed the market
[but] not derailed the market.”

But New York City is also facing the challenge of job cuts on Wall
Street. If the slowdown accelerates, some real estate experts are
worried that the amount of vacant space in office buildings, retail
stores and other types of commercial real estate might climb, while
rents drop. As of June 30, the overall vacancy rate for office
space was about 18 percent, basically unchanged from the peak of the
post-real estate boom, according to research firm Reis.
Investors are also concerned that banks could possibly see a jump in
troubled commercial loans, which have been one of the biggest
contributors to the nation’s nearly 400 bank failures since the start
of 2008, Deutsche Bank AG analysts wrote in a report last week.

About
70 percent of the architecture firms recently contacted by the
American Institute of Architects in its monthly survey reported that
they have at least one stalled project, according to Kermit Baker, the
institute’s chief economist. “The most common reason by a fairly wide
margin is the inability of the developer to obtain financing,” he said. [WSJ]


Related Articles

arrow_forward_ios
Ascena owns Ann Taylor, Lane Bryant, Lou & Grey and Cacique. (Getty)
Ascena restructuring approved post-bankruptcy
Ascena restructuring approved post-bankruptcy
Apollo Global Management will take over craft retailer Michaels in a deal that values the company at $3.3 billion. (Wikipedia Commons, iStock)
Craft retailer Michaels to go private in $5B deal
Craft retailer Michaels to go private in $5B deal
 JLL CEO of capital markets Richard Bloxam and Roofstock CEO Gary Beasley (JLL, Roofstock, iStock)
JLL gets in rental home business
JLL gets in rental home business
Mack-Cali Realty CEO Mahbod Nia and MaryAnne Gilmartin (Photos via Mack-Cali Realty)
Mack-Cali Realty names Mahbod Nia as CEO
Mack-Cali Realty names Mahbod Nia as CEO
The comedy club argues that if SNL can operate, then they should be allowed to operate too. (Getty)
Manhattan comedy club sues Cuomo over pandemic closures
Manhattan comedy club sues Cuomo over pandemic closures
(iStock)
These were Manhattan’s best office submarkets in Q4
These were Manhattan’s best office submarkets in Q4
(iStock/Illustration by Alexis Manrodt for The Real Deal)
Order up: Real estate investors line up to buy drive-throughs
Order up: Real estate investors line up to buy drive-throughs
Mayor Bill de Blasio (Getty, iStock)
NYC to revive $17B in public construction projects
NYC to revive $17B in public construction projects
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...