August 2009 RREEF Property Cycle Monitor

RREEF has put out its August update of its Property Cycle Monitor. Full file embedded below, but key takeaways:

• Slower production and spending in the greater economy is negatively affecting the commercial real estate market. The institutional property market continues to correct and values are falling as fundamentals continue to deteriorate. Fundamentals are projected to worsen through 2010 as rent declines struggle to pace diminishing demand.
• Apartments:
  • Should begin to improve along with the employment market, which is expected to be around mid-year 2010. Until then, vacancies will continue to rise and rents to fall, especially in markets inundated with condos converting to apartments and those with a strong shadow supply of rental homes.
• Industrial:
  • Will likely lag the apartments sector but perform better than the retail and office sectors. Vacancies have already jumped and will remain elevated in 2010 before improving in 2011.
• Office:
  • Will continue to experience sharp declines in rents, but at least some of the pain is already history. Vacancies will continue to work upward into 2011 when some relief will occur.
• Retail:
  • Will require the longest to rebound. Longer, less volatile lease terms and initial low vacancy allowed the sector to outperform the other sectors during the first stage of the downturn, but this trend is quickly changing. The sector is dealing with retailer bankruptcies, store closures, breach of co-tenancy clauses and rent reductions.

Similar Posts:

• US Office Vacancy At 5-Year High; Rents Plummet
• Retail Woes Push Vacancy Rates Up
• REIS vs. JLL – Who Will Be Right?
• Moody’s Commercial Property Price Index Posts Large Declines
• NAR August 2009 Commercial Real Estate Outlook

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