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Sunday, December 28, 2008

NY Times on Possible CRE Bailout

by Calculated Risk on 12/28/2008 08:54:00 AM

From the NY Times: A Wish List for Commercial Real Estate

Commercial real estate groups have been meeting with members of Congress, the Federal Reserve, the Treasury, the Federal Deposit Insurance Corporation as well as Mr. Obama’s transition team, to press their case. And they say they have a compelling one.
This is similar to the WSJ article I covered last week. The answer is there is no reason for a CRE bailout:
[T]his is really about property investors who bought commercial buildings at the price peak and are now underwater. But say the owners default and the properties are transferred to the bondholders - what is the risk to the economy? None.
The NY Times article claims CRE is in pretty good shape:
Although commercial real estate remains in better shaper than some other industries — there is a good balance between supply and demand, vacancy rates are modest and loan default rates have so far hovered at a rock-bottom 1 percent, according to trade groups — industry leaders warn that the sector faces significant problems.
Default rates are low - but starting to rise. However the balance between supply and demand is poor and vacancy rates are rising rapidly.