from Mish's Global Economic Trend Analysis
by Michael Shedlock
Voltron says: watch SRS make a comeback!
The Financial Times is reporting a Plunge in US commercial property.
Commercial property prices in the US in February saw their sharpest decline since records began nearly 15 years ago as sources of finance for deals has dried up, according to data from Standard & Poor’s out yesterday.
The value of commercial buildings fell 1.03 per cent between January and February, the largest monthly decline since at least 1993, when the industry was just emerging from a deep slump.
The fall in national property prices comes as banks have retrenched on lending due to credit crisis and the slowing economy, causing the volume of deals to slow sharply. The market for commercial mortgage-backed securities, which until last August was a major route to cheaper borrowing, has largely ground to a halt.
Sales of commercial properties were down 71 per cent in the first quarter compared with a year earlier, according to data from Real Capital Analytics.
Less Shopping = Fewer Malls
The Wall Street Journal is reporting Less Shopping = Fewer Malls.
Many of the largest
The slowdown comes as consumers rattled by the credit crisis rein in spending, causing retailers to rethink their previously aggressive expansion plans. Among the national chains that recently pared their growth plans are J.C. Penney Co.,
Standing in the way of a recovery are deep-seated problems such as depleted home equity and high personal-debt levels. "We believe it is going to be harder for consumer confidence to come back quickly until some of these issues are resolved," J.C. Penney's chairman and chief executive officer, Myron Ullman, said Monday at the shopping-center council's annual trade show here.
My Comment: I certainly agree about consumer confidence as noted in Consumer Sentiment: Is the Worst Yet To Come?
The mood at the five-day conference, which attracted nearly 50,000 attendees and is slated to conclude Wednesday, is cautious. "I'm not afraid for '08 [results]," said Michael Glimcher, chairman and CEO of Glimcher Realty Trust, which owns 23 malls. "Where you get nervous is thinking about '09. Retailers are clearly opening fewer stores, and they're being more aggressive" in negotiations with landlords.
Developers, in turn, are hitting the brakes. This year, they are expected to complete retail projects totaling 136.4 million square feet in the top 54
My Comment: A slowdown in commercial real estate means a slowdown in hiring at major retailers. The last 4 jobs reports were all negative (see April Jobs - Another Report From Bizarro World). When this slowdown hits fullforce unemployment is going to skyrocket.
Pennsylvania Real Estate Investment Trust, or PREIT, which owns 55 malls and shopping centers, has altered plans more than once because of waning demand from tenants. The developer had lined up Target Corp. and Home Depot to anchor its $73 million Monroe Marketplace shopping center to be built in
My Comment: Both Home Depot and Lowes are in deep trouble as noted in Disastrous Quarters At Home Depot, Lowe's. The pullout of majors like Home Depot, Target, Lowes, etc from a new shopping center can cause a cascade of pullouts by by other retailers down the line. When the "anchor" store pulls out, it is inevitable other stores will follow. Entire malls can be in jeopardy when the anchor stores leave.
Massive projects backed by big-name developers are no exception. Real-estate tycoon Stephen M. Ross's Related Cos. recently postponed portions of two enormous mixed-use projects in
The party is over and so are insane financing schemes. Commercial real estate is going to be a disaster. That disaster is not priced in, nor is the effect of a slowing CRE market on jobs, on sentiment, on consumer spending, or on foreclosures.
Mike "Mish" Shedlock