Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Office, Storefront Vacancies Mount


Commercial real estate next shoe to drop.

Given the pullback in consumer and corporate spending, it shouldn't be surprising to see a Big Rise in Unoccupied Office Space.

Office vacancies rose sharply in the first quarter, a trend that is expected to continue as a result of layoffs and new construction adding to supply. According to the real estate services firm Grubb & Ellis, first-quarter office vacancies rose to an average 13.6% nationally, up from 13% in the previous three quarters.

Commercial Construction Bust

David A. Rosenberg, chief economist at Merrill Lynch, is reporting Commercial Construction Boom Turns Bust.

Commercial construction has rolled over, driven by the substantial tightening in credit conditions that started late last year. Banks materially tightened lending standards for commercial and industrial loans in the fourth quarter of last year, and by the first quarter they were at a historic high. The regression work we did earlier this year suggested that it took about 2-3 quarters for a tightening in credit to have an impact on building, and the rollover we're now seeing is about right on cue.

San Diego Microcosm

Rich Toscano (aka Professor Piggington) is writing Employment Goes Negative.

San Diego employment has just decreased on a year-over-year basis, falling by 1,700 jobs between March 2007 and March 2008.

That is a very small drop in the grand scheme of things, representing a decline of just .1 percent. But it's the first time in a long time that employment has turned negative at all.

Eye of the Hurricane

Mike Morgan provided a long awaited update on the Florida housing situation last weekend. I talked about it in Eye of the Housing Hurricane - Mike Morgan Update. Here is a snip about commercial real estate in Florida.

Commercial and retail property are also becoming casualties in the back half of the hurricane. Drive through just about any Florida market to see all the For Lease signs on commercial property. Real-estate agents, lawyers, builders, contractors, mortgage brokers, insurance companies, furniture stores and all the rest are going out of business and leaving a flood of office and commercial inventory vacant.

Shopping Center Vacancies

The hard evidence is now in. There can no longer be any denial about what is happening in commercial real estate.

Click to enlarge

The above chart is from Shopping Center Economic Model Is History.

Inquiring minds will want to take a look at the number of bankruptcies, unplanned store cutbacks and the resultant glut of corporate real estate space presented in the above link.

A wave of regional bank failures is headed our way because of leverage to commercial real estate. The Fed can do nothing to stop it.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos