According to a new report from Costar News, the number of properties under distress and delinquent loans are up by 50% in 2009. Some eye-popping statistics include:
Specially Serviced CMBS Loans – loans that are delinquent or reached maturity without pay off or have ongoing issues with credit problems involving tenants or borrowers.
Jan. 2009 – $8.2 Billion
Sept. 2009 – $46.9 Billion
Number of distressed office buildings in U.S. – Buildings that were 60% vacant or more.
Jan. 2009 – 19,600
Sept. 2009 – 31,000
Plummeting Property Values – Office, retail and industrial/flex properties have lost between 15% and 35% of their value since 2007.
Year Office Bldgs Retail Bldgs Industrial/Flex Bldgs
2007 $219/SF $178/SF $61.50/SF
2009 $142/SF $132/SF $52.00/SF
As businesses have disappeared or made major cutbacks, the demand for space has declined significantly. In the first two quarters of 2007, office properties saw a net absorption of 41.8 million square feet. By comparison, in the first two quarters of 2009, tenants have returned 40.9 million square feet of space, nearly wiping out any gains over the past two years. Industrial/flex (think close in Eastside or the Sunset Corridor) properties have faired worse nationally, with net absorption of 94.1 million in the first two quarters of 2007, but gave back even more in the first two quarters of 2009 with 97.5 million.
All of this negative activity has created a swelling inventory of buildings with 60% vacancy or more. Oregon ranks 25th for the number of distressed properties (office, retail, and industrial/flex) by state. With 994 total properties under distress, we are fairing much better than the number one position holder, California, which has 80,734 total distressed properties. The lowest is Wyoming with 41 distressed properties. Our neighbors to the north (WA) are number 19 on the list with 1,404 distressed properties.