Crisis 2009 the Year in Review

2009 has been an exciting year for commercial real estate. During the stock market crash we watched treasury rates drop to 2% for ten year notes due to the flight to quality move. Then we saw job losses go off the charts, leading to more job losses. closings and ending of the notion that commercial real estate would survive the recession unchanged. Retailer failures piled up, big boxes closed, mega malls defaulted and office vacancies grew. Re-use, re-fit, re-lease, Politely called Economically Challenged Properties.

The banks all needed to be saved, some failed, some are hanging on by a thread (Corus). Banks stopped lending, Hard money dried up, Fannie Mae and Freddie Mac stopped cash out loans. FHA offered waivers for new construction and opened up the FHA 242 hospital loan program for 223(f) refinances without requiring construction. CAP rates went up and prices for commercial realty went down due to distressed forced sales, defaults and lack of new purchase financing.

Treasuries rates returned to normal levels due to massive measures to provide liquidity by the FED and the massive debt of the U.S.A.

Several con men went to jail and even more are sailing off into the sun set. Property values are lower than last year and vacancies will not peak until job growth returns.