Weekend Video: Rise Of Vacancies And Fall Of Rents

Commercial real estate values in the U.S. have dropped 27% in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending. Via Bloomberg.com an analysis and discussion with the Senior Analyst of BMO Capital Markets. He talks about the fundamentals that deteriorate throughout the commercial real estate sector and the rise of vacancies and the fall of rent.

The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. A rebound isn’t likely until the second half of next year, the National Association of Realtors forecast in a separate report.

Unemployment of 9.4 percent, falling industrial production and a drop in consumer spending curbed property demand, NAR said. Falling rental income and scarce credit are hurting both landlords and investors in securities backed by commercial property loans. Defaults and late payments on commercial mortgage-backed securities may surpass 7 percent by year-end, according to research firm Reis Inc. 

Enjoy this video via Bloomberg.com for some insight into the fundamentals that deteriorate throughout the commercial real estate sector and the rise of vacancies and the fall of rent: