In The News › Report sheds light on dismal commercial market recovery

Report sheds light on dismal commercial market recovery

Monday, October 12, 2009
New Orleans CityBusiness

As the commercial real estate market continues its downward plunge, its recovery may not be the robust, v-shaped surge in activity that many economists had been hoping for.

The Mortgage Bankers Association’s second-quarter “data book” on commercial real estate showed some signs of life in commercial mortgage originations but pointed to dismal numbers in unemployment, gross domestic product and building transactions to make the case that “the point at which things are no longer getting worse and are about to start better is also the point at which things are at their worst.”

Anirban Basu, CEO of the Sage Policy Group in Baltimore, said one of the main ills plaguing the commercial market is “the excess supply of space in an economy that’s lost over 7 million jobs, and continues to lose jobs at a feverish rate.”

The association’s numbers bear out that statement. Nationally, vacancy rates in retail properties have jumped nearly 6 percent, to 17.6 percent, compared with the second quarter of 2008. Office vacancies rose by half as much but still have topped out at 18.5 percent, the highest vacancy rate in more than six years.

Another statistic highlighted by the MBA report is loan originations, or the volume of mortgages loaned to borrowers in a given period.

The MBA’s Origination Index, which is based on a starting point of 100, dropped to 40, the lowest level in its eight-year history, in the first quarter of 2009. That figure has recovered to 60 since then, but is still off of its peak of 352 in the second quarter of 2007.

Foreigners not buying as many homes in U.S.

Interest in U.S. real estate by international buyers declined because of the worldwide recession and severe credit crunch, according to the 2009 National Association of Realtors Profile of International Home Buying Activity.

An estimated 154,000 homes were sold to foreign buyers between the end of May 2008 and the end of May 2009, down from about 170,000 international transactions during the previous 12 months.
The median price for a home paid by foreign buyers was $247,100, and the total dollar volume was $38.7 billion.

The majority of foreign buyers — 33.9 percent — purchased a property in the United States to use it for a vacation home, followed by 23.5 percent who said they purchased the property for investment and vacation purposes, 18.3 percent who said they want to use it as a residential rental property for investment and 3.5 percent who want to invest in commercial property.

Results were based on responses from 3,785 Realtors nationwide.

St. Tammany poised for growth, officials say
Despite a few recession-induced hiccups, St. Tammany Parish is poised for horizontal growth along Interstates 10 and 12.

That was the message from Ivan Miestchovich, director of the University of New Orleans Center for Economic Development, and parish Chief Administrative Officer Bill Oiler at a Bureau of Governmental Research breakfast Oct. 2 in Covington.

“Economic development is not brain surgery,” Miestchovich said. “You do the right things, and the right things are going to happen. St. Tammany Parish has done the right things.”

Among them, the parish’s transportation infrastructure — namely the Causeway bridge, the convergence of interstates 10, 12 and 59 and access to Interstate 55 — has opened doors to growth.

St. Tammany benefits from being at the center of the I-10/I-12 corridor, linking business and industry in Baton Rouge to Mississippi, he said.

Not all the news is rosy for St. Tammany, though.

Construction has fallen sharply now that the post-Katrina building boom has tapered off and the housing recession has kicked in.

Building permits in the parish fell below 1,000 units in 2008, Miestchovich said.

“That’s the first time I’ve seen that happen since the 1980s,” he said. “There’s still a lot of price pressure and not a lot of incentives to put new construction in the ground.”

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