Recently released information from the research firm Delta Associates says distress in the commercial sector is maintaining a plateau.
Delta Associates said in its report, "The plateau has occurred as lenders continue to extend debt obligations, and commercial property values are stabilizing in many markets. With property values beginning to rise in select metro markets, some deals are no longer under water."
The firm's analysts explained, "The real test of the plateau of distress will be seen this year, with almost $300 billion in loans coming due and delinquency rates possibly edging up again. We think meaningful decline in distress will not occur until 2012."
- The Office sector continues to represent the largest share of distressed real estate at $43.3 billion, which is an increase of over $3.8 billion, or 9.8 percent, since February 2011.
- Apartments remain in second place, with $38.4 billion of distress. Commercial and multifamily mortgage origination volumes increased 44 percent in 2010 over the previous year, with mortgage bankers reporting $118.8 billion of closed commercial and multifamily loans, according to the Mortgage Bankers Association's 2010 Commercial Real Estate/Multifamily Finance: Annual Origination Volume Summation. "Coming off of the 2009 lows, commercial and multifamily originations increased by a strong 44 percent in 2010," said Jamie Woodwell, MBA's Vice President of Commercial Real Estate Research. "Low interest rates coupled with improving economic fundamentals have the potential to draw out even more borrowers in 2011."
- The hotel sector ranks in third place with $31.8 billion in distress.
- The areas with the highest amount of distress are Manhattan and Los Angeles.
The firm's analysts note that while the volume of distressed commercial real estate properties is significant, also of significant concern is the looming volume of stressed property, with characteristics such as maturing loans, bankrupt tenants, financially troubled owners, or other obstacles that could potentially lead to distress in the future.
Comments(2)