By Patrick Rucker
WASHINGTON, Dec 17 (Reuters) - The global credit crunch is putting a crimp on the U.S. commercial real estate market and the sector's decline will continue deep into next year, the National Association of Realtors said on Wednesday.
Vacancy rates will likely increase in the office, retail and industrial sectors into the third quarter of next year, while vacancies among multi-family units are expected to remain flat, the trade group said.
'Although access to residential mortgages has improved, the opposite is true for commercial loans,' said Lawrence Yun, NAR's chief economist. 'We need liquidity for commercial mortgage-backed securities not only to free the market, but also to rollover existing debt,' he said, encouraging U.S. policy-makers to step in to help.
CALL FOR FED AID
The U.S. Federal Reserve and Treasury Department have vowed to soak up roughly a trillion dollars in mortgage-related assets to help restore the housing market to health and plan to commit billions more to support the consumer debt market.
In announcing a $200 billion the plan to free-up credit for consumer and small business lending late last month, the central bank said it might widen its aid and use the program to soak up fresh commercial loans that cannot find a buyer.
'Those additional steps are needed,' Yun said in an interview with Reuters. 'The commercial real estate market is frozen because there is no government backstop. Lenders are not making commercial loans because there are no private investors who want to hold them.'
Under the existing program, the Treasury agreed to cover up to $20 billion in potential losses by drawing on a $700 billion financial rescue fund created by Congress.
By agreeing to take on the credit risk, the Treasury leveraged large-scale lending by the Fed. A senior Fed official told reporters on Tuesday the central bank could proceed along similar lines as it considers more ways to unclog credit markets.
The official said this was an area where the Fed could collaborate with the Treasury and the incoming team of President-elect Barack Obama, and that more guidance may be forthcoming in the future on what to expect.
GRIM SIGNS
A report last week from the Federal Reserve showed a contraction in commercial mortgage stock from June to August -- the first negative quarter in fourteen years.
'(That) data provided hard evidence of this drought in commercial real estate lending,' Barclays Capital wrote in a research note on (day of week).
Cities like Detroit, Dallas and Phoenix are likely to see office vacancy rates top 20 percent in the coming months, the Realtors said, while average retail rent is likely to contract by 7.3 percent next year.
The Barclay's note says that multi-family housing should enjoy uncommonly healthy access to credit because mortgage-finance giants Fannie Mae and Freddie Mac invest in that space.
(Reporting by Patrick Rucker; Editing by Chizu Nomiyama) Keywords: USA REALESTATE/NAR (patrick.rucker@thomsonreuters.com; +1-202-310-5474; Reuters Messaging: patrick.rucker.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Dec 17 (Reuters) - The global credit crunch is putting a crimp on the U.S. commercial real estate market and the sector's decline will continue deep into next year, the National Association of Realtors said on Wednesday.
Vacancy rates will likely increase in the office, retail and industrial sectors into the third quarter of next year, while vacancies among multi-family units are expected to remain flat, the trade group said.
'Although access to residential mortgages has improved, the opposite is true for commercial loans,' said Lawrence Yun, NAR's chief economist. 'We need liquidity for commercial mortgage-backed securities not only to free the market, but also to rollover existing debt,' he said, encouraging U.S. policy-makers to step in to help.
CALL FOR FED AID
The U.S. Federal Reserve and Treasury Department have vowed to soak up roughly a trillion dollars in mortgage-related assets to help restore the housing market to health and plan to commit billions more to support the consumer debt market.
In announcing a $200 billion the plan to free-up credit for consumer and small business lending late last month, the central bank said it might widen its aid and use the program to soak up fresh commercial loans that cannot find a buyer.
'Those additional steps are needed,' Yun said in an interview with Reuters. 'The commercial real estate market is frozen because there is no government backstop. Lenders are not making commercial loans because there are no private investors who want to hold them.'
Under the existing program, the Treasury agreed to cover up to $20 billion in potential losses by drawing on a $700 billion financial rescue fund created by Congress.
By agreeing to take on the credit risk, the Treasury leveraged large-scale lending by the Fed. A senior Fed official told reporters on Tuesday the central bank could proceed along similar lines as it considers more ways to unclog credit markets.
The official said this was an area where the Fed could collaborate with the Treasury and the incoming team of President-elect Barack Obama, and that more guidance may be forthcoming in the future on what to expect.
GRIM SIGNS
A report last week from the Federal Reserve showed a contraction in commercial mortgage stock from June to August -- the first negative quarter in fourteen years.
'(That) data provided hard evidence of this drought in commercial real estate lending,' Barclays Capital wrote in a research note on (day of week).
Cities like Detroit, Dallas and Phoenix are likely to see office vacancy rates top 20 percent in the coming months, the Realtors said, while average retail rent is likely to contract by 7.3 percent next year.
The Barclay's note says that multi-family housing should enjoy uncommonly healthy access to credit because mortgage-finance giants Fannie Mae and Freddie Mac invest in that space.
(Reporting by Patrick Rucker; Editing by Chizu Nomiyama) Keywords: USA REALESTATE/NAR (patrick.rucker@thomsonreuters.com; +1-202-310-5474; Reuters Messaging: patrick.rucker.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.