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Commercial Property Values and Rents Expected to Keep Falling
The commercial real estate outlook for the remainder of 2010 is grim. According to Deloitte’s recent online survey of real estate executives, 76 percent of respondents expect commercial property values to continue to fall this year, and 73 percent predict asking rents will follow the same trend.“The commercial real estate market continues to be adversely affected by one of the deepest recessions in decades,” said E.J. Huntley, principal of Deloitte Financial Advisory Services LLP and national leader of the real estate consulting practice. “Increased unemployment has resulted in less demand for office space, reduced rents, and an overall decline in commercial property values.”Huntley said right now, commercial real estate executives are weighing their options, determining if the time is right to invest while prices remain depressed and before interest rates begin to rise.Roughly three-quarters—74 percent—of survey respondents expect interest rates to increase in 2010, with 48 percent expected rates to jump by 50 basis points of more. The survey also found that 59 percent of executives think cap rates will rise and 57 percent predict discount rates will increase.But with property prices falling and interest rates still reasonable, some executives are looking at this time as an opportunity to invest. According ... more
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