Bloomberg Survey:Commercial Real Estate Recovery Unlikely Anytime Soon

Bloomberg recently completed a survey of 115 commercial real estate firms across the United States. The survey found that the U.S. commercial real estate markets are unlikely to recover before 2011-2012 . This is what we have been saying all along at Stella Capital and as this survey shows we will continue to see excellent buying opportunities up until the recovery starts and through the initial phase of the recovery.
The survey showed many US companies are continuing to look for ways to cut costs and reduce their work forces which means office and industrial space will still continue to contract and rents most likely will continue to fall. This trend means we will see vacancy rates increase into 2010 but that trend should reverse in the later part of 2010. This senerio will force many owners to sell their properties at distressed levels as cash flow decreases and they can no longer cover debt payments.
Along with falling rents and increased vacancy the commercial lending industry has a large pipeline of commercial loans that they have foreclosed upon or have filed a notice of default upon and therefore will typically own in 90-120 days. This pipeline of loans that will be converted to real estate owned by the banks will also present a great buying opportunity for Stella Capital. We have already started to see some of these real estate properties being marketed but there is a surplus of properties that the banks are just starting to get their arms around and will be selling through out 2010 and 2011.
All of the above events have formed the perfect storm for commercial real estate here in the US. Stella Capital is ready to take advantageof these great buying opportunities and we are very excited about 2010 and 2011.