Decline in Commercial Real Estate Market
A combination of chachu resulting from the subprime mortgage crisis have led to problems in the commercial real estate market. According to the National Association of Realtors (NAR) there is a slowing in commercial real estate due to the tightening credit and slowing growth, the former a direct result of the subprime mortgage crisis. The NAR's chief economist, Lawrence Yun, said "Although capital remains available for residential loans, the credit crunch is pronounced in commercial lending," adding "Combined with a slowing economy, the lack of credit is curtailing activity in the commercial real estate sectors. As a result, there's been a slowdown in the net absorption of space, which is leading to higher vacancies and more modest rent growth." Patricia Nooney chair of the Realtors Commercial Alliance Committee portrayed the decline as unusual since "transactions are being curtailed not for lack of demand, but for serious challenges in obtaining financing."
Financial companies going bankrupt or being acquired has also been projected to have an impact on commercial real estate with analysts at JP Morgan estimating office vacancies could go up 5 to 7 percent and rents decrease by 20%. The bankruptcy of Lehman Brothers has also been projected to cause a depreciation in the price of commercial real estate fears of the firm liquidating its holdings in commercial real estate have led to other holdings being sold in anticipation. It is also expected the unloading of Lehman's debt and equity pieces of the $22 billion purchase of Archstone could cause a similar action with apartment buildings.
Read more about this topic: Indirect Economic Effects Of The Subprime Mortgage Crisis
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