Commercial Real Estate Will Decline This 2009

by : Eliza Maledevic Ayson

Last week, real estate mogul Sam Zell stated that the commercial real estate industry should anticipate an additional two years of good times but may see some flaw starting in 2009.

Zell said at the New York University 12th annual REIT Symposium in New York that if he is a gambling man, he will look at the 2009 first quarter with some level of doubt.

Zell sold for $23 billion plus the assumption of debt in the largest REIT deal ever, the Equity Office Properties Trust to Blackstone Group early this year.
Equity Residential which the chairman is Zell, is a REIT that owns apartments and also bearing a number of real estate and other ventures domestically and abroad. He is working to purchase the Tribune Co. which is a media deal he refused to discuss.
The low U.S. unemployment rate which inflames demand for office space and apartments is clear to start increasing in the next few years and that a new presidential administration can change the overall economy.
He stated that if he will look for the period of weakness he could expect the real estate industry to face a lot of change starting in 2009.

For the past couple of years, commercial real estate has been up of its cycle, with increasing rents and asset prices.

In the meantime, the U.S. residential housing market faces growing problems from foreclosures which result from subprime loans which were given to those with risky credit histories.

Zell sated that 'everyone in this world made all these dumb subprime loans'.
He added that in commercial real estate, he believes that there is certain amount of that in the industry nowadays in where people tend to stretch their limits.
Zell said that lenders will begin to raise their standards to pay off for risk.

Eliza Maledevic