CRE market improves, some problems still persist

Despite improvements, some industry members are still concerned about the commercial market.

Commercial real estate conditions rose during the first quarter of this year compared to the final three months of 2012, but there are still some problems in the market that may affect a full recovery in the future.

There was a total Overall Index figure of 69 in The Real Estate Roundtable's Q1 2013 Sentiment Survey. This identifies total market sentiment among industry members. It was still not up to the high point of 77 recorded in 2011, but was a gain from the previous quarter's level of 69. The Future Conditions Index jumped to 67, five points improved from the previous quarter's figure. Current Conditions reached a level of 70, which was two points improved from the fourth quarter.

"As today's survey shows, commercial real estate is on the mend, but it remains a fragile recovery very specific to property type and individual markets," said Robert Taubman, chairman of The Real Estate Roundtable. "It also is clearly dependent on what happens with the broader economy, policy decisions being made – or not made – in Washington, and how policymakers ultimately unwind what has been a very long stretch of accommodative monetary policy."

There are multiple risks to market recovery that have many industry members concerned. One of these issues is pressure on property values, the report noted. This could hurt many aspects of the market and economy. There is also the prospect of mortgage payments rising due to interest rate jumps. This would also have the potential to lower overall asset values.

Nearly 10 percent of those surveyed said they feel the market now is better than it was one year earlier compared to the fourth quarter, the report added. There was also a 16 percent increase in those who felt the situation was significantly improved.

CMBS delinquencies decline in January
Further improvement in the market may be seen for property management companies in the commercial mortgage-backed securities market. The level of delinquencies for this loan category fell to 9.57 percent during January, according to a report from Trepp. This was 14 basis points lower than the previous month's figure, as well as the furthest the rate declined in nearly one year.

Total new loan delinquencies totaled $2.8 billion during the month, the report added. Despite the sizable level, it was less than in December, when the figure was $3.2 billion.

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