CMBS vacancy has risen dramatically over the last year to a record 8% in April according to the most recent Trepp Wire. Lodging and multifamily lead the way with the highest vacancy rate although multifamily moderated somewhat from the March vacancy level.
Overall, the can continues to be kicked down the road. Even though you won’t hear much about it in the main stream media, increasing defaults are foreclosures are looking more likely. The situation remains that many CMBS issues from 2005-2008 are going to have difficulty qualifying for refinancing without equity injections because of both tighter underwriting standards and declining cash flows.
Interestingly most banks, decided to reduce loss reserves in the prior quarter. Seems like the debt party is coming whether the issuers like it or not.
Posted May 8th, 2010
by John Fox
Tags: cmbs deliquency, commercial real estate debt, debt reserves, loan losses Posted in Commercial Real Estate
Retail and restaurant expansion plans are perking up for the first time in two years.
The National Restaurant Association is reporting that its Restaurant Performance Index (RPI) index rose to its highest level in 27 months in February and capital expenditures and expansion plans are also in the rise. Given that we have lost more than 280,000 eating and drinking place jobs during the recession, and an untold number of restaurant locations, this is a welcome sign for the industry (read the full press release).
At the same time, Retail Lease Trac is reporting an increase in projected store openings for the first time in a year. Their tracking of 2,000 leading retail companies indicates plans to open over 65,000 stores in the next 24 months.
All of this bodes well for net lease investment which is leading the charge as one of the few bright spots on the commercial real estate horizon. Many restaurants and a large number of expanding retailers are single tenant entities and often look to investors as landlords and to assist with their expansion plans. Net lease investments have long had the attraction of very limited property management duties and maintenance compared to other real estate investments. In addition,with banks paying a paltry .25% on money market accounts, the opportunity to receive an 8% or better return on that same cash, and limit investment risk, is a compelling opportunity in current environment.
Posted May 8th, 2010
by John Fox
Tags: net lease investing, restaurant real estate, restaurant sales, retail expansion, Retail Real Estate Posted in Commercial Real Estate, General Retail, Retail Real Estate
