Posted on 15 February 2010 by Christopher Hanson
The walkathon in the commercial real estate market continues.
A Wall Street Journal article last week reported on the Mortgage Bankers Association’s sale of its headquarters building in Washington, DC to CoStar Group for $41.3 million – about $38 million less than what it paid for the building three years ago, and also way below the $75 million the MBA received from a group of banks to finance the purchase.
So is the MBA taking a walk on their underwater HQ? They aren’t saying.
In the WSJ piece, MBA CEO John Courson said, “We’re not going to discuss the financing.”
Which is a different tune than he was singing a few months ago, saying those who owed more than their property is worth should continue paying, even if it didn’t make economic sense. “What about the message they will send to their family and their kids and their friends?” Courson asked.
Yeah, about that message….we got it loud and clear: it’s the smart thing to do!
Posted on 13 February 2010 by Christopher Hanson
Dr. Sam Chandan, President and Chief Economist of Real Estate Econometrics and an adjunct professor of real estate at the Wharton School of the University of Pennsylvania, recently gave a presentation on what he believes 2010 holds for the commercial real estate market. The upshot of his findings:
- Though the economy remains fragile, we are beginning to recover from the depression scenario
- The economy will need support the next few years
- There will be some modest growth in spending in 2010
- Multifamily is not faring well as the greatest demographic for renters is in the 21-29 year age range; this group is facing 16% unemployment and living back at home or pursuing advanced degrees
- The real estate sector of the economy has declined sharply from 2007 highs
- The first time home buyer program undercut the industry
- NOI will stabilize over time; last recession it took 4 years to stabilize
- Transaction activity will be primarily concentrated in the REIT sector and private buyers
- Private buyers will be seeking properties in the $1-3,500,000 price range
- Prices will stabilize and credit availability will be more robust
- Retail operations will remain challenging
- Still a disparity between buyers and sellers but the gap is narrowing
- Investors waiting for the flood of distressed properties have been disappointed
- FDIC has instituted a variety of programs to avert flooding the market
- Lenders are exercising the extend and pretend option
- The CRE section of the economy will revive with the creation of sustainable jobs
Dr. Chandan’s personal website is www.chandan.com.
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