Though the U.S. commercial real estate market is relatively strong despite an uneven economy, a mass of debt due to mature between now and 2015 gives reason for pause, according to a commercial real estate report issued today by Deloitte.
Activity has increased by just about every measure, according to the report, because of the abundance of distressed properties for sale, the growing availability of capital to finance stable assets and the growing share of funds placed in real estate investment trusts.
At the same time, it remains to be seen how commercial investors react to new government regulation, such as the Dodd-Frank Act and the Volker Rule. Moreover, refinancing is still risky because of the huge quantity of real estate loans scheduled to mature by 2015, largely held by banks already facing liquidity challenges. Until those debts stabilize and loan originations return for non-trophy assets, the report concludes, the recovery will be gradual.
“It’s important to remember that commercial real estate was the first sector to be hit hard by the downturn so it is further along in rebounding than other businesses,” said Bob O’Brien, vice chairman and real estate sector leader of Deloitte. “At the same time, the wall of debt maturity that will come due between now and 2015 still may present short and longer term challenges for the remainder of this year and into 2012.” — Adam Fusfeld