Commercial Real Estate Investment Could Decline

Washington, DC, March 13, 2008—Investment in commercial real estate could fall dramatically this year, the National Association of Realtors warned.

NAR said the value of U.S. commercial real estate deals could decline by more than a third due to the global credit crunch.

"Investment is waning," the National Association of Realtors said in a report that predicts the volume of deals could shrink by as much as 40 percent from last year's record $427.2 billion.

Lawrence Yun, NAR chief economist, said tighter lending standards are hitting the commercial sector as vacancies and rents are holding steady, which indicates the commercial fundamentals are holding steady.

“Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market,” Yun said.

Patricia Nooney of St. Louis, chair of the Realtors Commercial Alliance Committee, said the investment cycle appears to be turning. “It looks like investors are taking a wait-and-see attitude,” she said. “Even with fairly stable fundamentals and capital available from institutional investors, it appears investor confidence has declined, and some private investors have had problems obtaining financing. Commercial real estate investment set a new record in 2007, but now that we’re in a period of economic uncertainty, transaction volume is likely to decline.”