Credit Availability Key to Commercial Real Estate

Washington, DC, Nov. 20, 2009--The economic downturn has had a pronounced impact on commercial real estate sectors, but credit availability is the big unknown that will determine how soon commercial markets recover, according to the National Association of Realtors.

“The first commercial mortgage bond deal in over a year shows the Federal Reserve’s efforts to sell securities through the TALF program can be fruitful, but the level of activity is well below what is required to resuscitate the commercial market," said NAR chief economist Lawrence Yun.

"Credit availability needs to significantly rebound for any hope of a meaningful commercial recovery in 2010.”

The Commercial Leading Indicator for Brokerage Activity1 rose 0.9 percent to an index of 102.4 in the third quarter from 101.5 in the second quarter, but is 11.1 percent below a reading of 115.3 in the third quarter of 2008.

The index in the second quarter was at the lowest level since the first quarter of 1994; NAR’s track of the commercial leading indicator dates back to 1990.

Looking at the overall market, commercial vacancy rates are rising and rents are declining, according to NAR’s latest Commercial Real Estate Outlook.

Vacancy rates in the office sector are expected to rise from 16.1 percent in the third quarter to 18.5 percent in the third quarter of 2010, with job losses continuing to dampen the market.