Economist sees slow revival in commercial real estate

Thursday, 04 February 2010
By Mike Fitts

COLUMBIA -- Real estate markets are likely to be bottoming out in 2010 and the slow pace of deals will begin to revive, according to a top economist at Grubb & Ellis.

Robert Bach, the national firm’s chief economist, gave his forecast of the market’s future to a gathering of Columbia real estate professionals Wednesday morning. While values and prices might still descend further, much of the damage has been done, he said.

“This is the year when people will be peeking out of their bunkers,” Bach said.

His optimism was reflected in an instant electronic survey of the room conducted by the firm’s local affiliate, Grubb & Ellis Wilson Kibler. The survey found that 69% of those in attendance held more optimism for 2010 over the past year.

Commercial real estate credit will continue to be tight, but lenders are expected to extend loans to existing customers, rather than take over properties in such a market, Bach said.

Credit is still a major problem for local real estate, according to the company’s audience survey. The survey found that 49% said that financing is the biggest obstacle to their success right now.

Office vacancy rates nationally are near a 20-year high and could peak in 2010. Rents will continue a gradual decline, he said.

Tenants are looking to make new leases in their current locations at better rates, more often than they are seeking to relocate, Bach said.

In Columbia, office vacancies will peak by mid-year, with rents reaching a low too, according to the company’s market projection.

Nationally, employment will bottom out, with better and worse months alternating. A revival in employment and wage growth is necessary to get consumers back into spending, he said. When they do, there is some pent-up consumer demand that could buoy retailers.

“My sense overall is that the economy will make it through this,” Bach said.

FDIC Chair Sheila Bair: Big Banks Still Aren't Lending Enough

I was surprised that the story below didn't get much press.

I'm not sure if it is because everyone trying to get a loan, whether to buy a house or a car or expand a business or even start business already knows this so the media thought, "no need to report it, they already know."

But when you think about the fact that the nation's largest banks were posting record losses just a year ago and today they posting profits, one has to wonder how the turn around happened. If your deposits are not increasing because Americans are struggling to make ends meet then you must have stopped loaning money.

I am not advocating loaning money at previous levels to those without the ability to repay the loan unless they hit the lottery, but in today's current lending environment getting loan can is very difficult and can be a long drawn out task ...

FDIC Chair Sheila Bair: Big Banks Still Aren't Lending Enough

Wednesday November 11, 2009 8:17 a.m

By Associated Press

NEW YORK (AP) — The head of the Federal Deposit Insurance Corp. said Tuesday she's "very worried" that the nation's biggest banks aren't lending enough and warned the economy could take another turn for the worse without increased access to credit.

FDIC Chairman Sheila Bair said the FDIC's upcoming quarterly report would show that "not many large institutions are doing a very good job of lending." Instead, she said, some are taking advantage of near-zero interest rates by borrowing dollars cheaply to buy higher-yielding assets like stocks or commodities — a move known as the "carry trade."

"I don't see much money going out (from banks). I see a lot of carry trade," Bair told a banking conference in New York. "It used to be you take deposits and you lend out money. We'd like to see more of that."

Many banks have tightened lending standards following a wave of residential and commercial property defaults. Others say they want to lend but see little demand as consumers and businesses seek to pay off debt, not take on more.

The lack of lending by large banks is dangerous at a time when many small and midsize banks are teetering on the brink amid the economic downturn, Bair said.

"I'm very worried (that) the larger institutions don't seem like they're stepping up to the plate providing credit," Bair said. "Because if they don't do that, we're all in the soup."

Addressing the rash of bank failures, Bair said the FDIC had enough funds to shut down troubled banks and would tap its line of credit with the Treasury only as a last resort. There have been 120 bank failures this year, and Bair predicted "many more" ahead.

On the regulatory front, Bair reiterated her agency's bid to require banks to hold more capital as a buffer against rough times, even if it eventually reduces the amount of funds available to lend. She said the requirement would not only protect banks but could also help prevent asset bubbles by reducing excess credit in the financial system.

"I think we have the authority and hopefully the will to do that," she said.