Monday, June 21, 2010

June Market Watch: State of the Commercial Real Estate Market

A recent quarterly survey by Real Estate Roundtable suggests the commercial real estate market is beginning to stabilize. The group surveyed more than one hundred senior real estate executives for its quarterly report. 82 percent believe market conditions today are better than they were a year ago and seventeen percent characterized conditions as “much better.”

Roundtable CEO Jeffrey DeBoer said, “Clearly, the sense of gloom that prevailed a year ago has eased, property values no longer seem to be in a free-fall and market participants are feeling more confident.” The survey also noted that financing can be challenging for some properties, as defaults are still rising. Transaction volume is down 80 to 90 percent and values are down nearly 50 percent in some markets. “What’s needed now is robust job creation, more equity and restoration of secondary market financing so that banks can clear their balance sheets of toxic assets and begin lending again to credit-worthy borrowers," DeBoer said.

In mid-May, Marielle Jan de Buer (CMBS) and Thierry Perrein (REITs) hosted roundtable discussions in New York and Boston about the current state of commercial real estate lending. Below are some highlights:
• The tone in the debt markets has changed dramatically in the past two quarters; liquidity is flowing back into the market.
• There has been an increased appetite for commercial real estate loans in general.
• Sponsors are refinancing (instead of extending) and recapitalizing while acquisitions are heating up.
• Competition among lenders is increasing-spreads are coming in.
• Life insurance companies and banks are fi lling the void left by CMBS.
• Life insurance companies have targeted $32 billion of origination in 2010 (up from $18 billion in 2009).
• The overall resurgence in the capital markets coupled with the lack of available product has led to greatly improved pricing and leverage.

As the economy and the commercial real estate markets continue to improve, NBS Financial Services is consistently quoting and closing loans for well located, cash-flowing real estate at the 65-75 percent loan to value levels. Our lenders have money to lend and see the Pacific Northwest as one of the strongest markets in the country to invest in. Rates are still near historic lows. Call us today to secure financing for your apartment, office, retail, or industrial property.

Issues Affecting Commercial Mortgage Rates:
• Lukewarm treasury auctions throughout the month as European economic crisis looms.
• The recent move in Treasury rates caused swap spreads to widen as rates fell across the yield curve.
• Loan sales market is booming, $2.6 billion of loans on the market for sale through the end of June.
• Increase in loan demand last 60 days (balance sheet and CMBS execution).

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