Commercial/Multifamily Real Estate Market Continues to Feel Effects of Economic Downturn

The Mortgage Bankers Association (MBA) today released its Commercial Real Estate/Multifamily Finance Quarterly Data Book for the third quarter of 2009. Though technically the third quarter likely marked the end of the recession, strains on various parts of the commercial/multifamily real estate market continue to be felt.This analysis focuses on the overall state of the economy and the resulting impacts on real estate fundamentals, mortgage origination’s, mortgage debt outstanding and mortgage performance in the third quarter.

Here are highlights from the report:

• Vacancy rates rose in the third quarter for all major property types.
  • For apartment properties, vacancy rates rose from 6.5 percent in the third quarter of 2008 to 8.4 percent in the third quarter of 2009.
  • Industrial properties saw vacancy rates rise from 9.8 percent to 13.0 percent
  • office properties saw a rise from 16.0 percent to 19.4 percent and retail vacancies rose from 12.9 percent to 18.6 percent.
• Asking rents have been falling –
  • 6 percent for apartments
  • 9 percent for industrial properties
  • 9 percent for office properties
  • 8 percent for retail properties
• Property Sales and Construction activity have seen significant declines
  • Year-to-date property sales in 2009, through 3rd quarter, were 72 percent lower than the same time in 2008, which was 66 percent lower than they had been in 2007.
  • Every major property type was affected
  • Sales volume is so low it is hard to gauge commercial property prices but the Moody’s/REAL index showed an 11.5 percent drop over the quarter.
  • New construction activity has slowed to a crawl.  Nationwide construction was started on only 5,000 units in multifamily housing in October – the lowest level ever.  Given market fundamentals and pricing it is unlikely we will see a significant rebound any time soon.

All in all I would say this report paints a pretty bleak picture of the commercial and multi-family markets. 

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