February 11, 2010
The Congressional Oversight Panel, chaired by Elizabeth Warren has issued its February report, and it’s focus is on “Commercial Real Estate Losses and the Risk to Financial Stability”.
It’s a long read (189 pages), but from the executive summary here are some key points:
Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present ?underwater – that is, the borrower owes more than the underlying property is currently worth. Commercial property values have fallen more than 40 percent since the beginning of 2007. Increased vacancy rates, which now range from eight percent for multifamily housing to 18 percent for office buildings, and falling rents, which have declined 40 percent for office space and 33 percent for retail space, have exerted a powerful downward pressure on the value of commercial properties.
The largest commercial real estate loan losses are projected for 2011 and beyond; losses at banks alone could range as high as $200-$300 billion.
The report goes on and on, and starts from the top (answering the question what is commercial real estate), but as you get into the meat of it, it does contain some good data. The conclusion obviously is that we’re just heading into the storm, and we’re not prepared.
Full report embedded below…
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