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By Matthew Quinn
This year will be another tough one for commercial real estate, according to a new survey. That is, unless you're looking to rent or buy space.
Roughly three-quarters of executives expect both commercial property values (76 percent) and asking rents (73 percent) to continue to fall in 2010, according to a survey of more than 325 real estate executives and corporate tenants conducted by Deloitte.
"Increased unemployment has resulted in less demand for office space, reduced rents and an overall decline in commercial property values," said E.J. Huntley, principal, Deloitte Financial Advisory Services and national leader of the real estate consulting practice. "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."
Of course, investors, as well as their bankers, still have to deal with their existing properties and loans before they can move on with new investments.
Elizabeth Warren, head of Congressional oversight for TARP, laid out a gruesome forecast for commercial real estate loans and their impact on banks on Monday.
"By the end of the year, about half of all commercial real estate loans are gonna be underwater, and they are concentrated in the midsize banks," she told CNBC, according to the New York Times. "We now have 2,988 banks that have these dangerous concentrations of commercial real estate lending."
That said, many investors are gearing up to take advantage of the commercial real estate downturn. Forty-six percent of respondents said they feel today's lower prices make buying more attractive than leasing. In fact, 51 percent of real estate company executives and 39 percent of commercial property tenants said their companies are currently investigating potential acquisitions.
Those expecting to strike deals may want to do so in the near future, as 74 percent of executives expect interest rates to rise in 2010, with 48 percent expecting rates to increase by 50 basis points or more.
Then again, most don't expect the market to turn around any time soon. A full 63 percent of respondents predict the market won't fully recover for two to three years, while 29 percent believe it will take four years or longer. Only 8 percent anticipate a full recovery within the next year.
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