Commercial real estate hits lows

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Sunday, February 01, 2009

STATEWIDE — Commercial real estate markets nationwide and in Oregon will bottom out this year, and not see a meaningful recovery until 2010, according to a joint report by PricewaterhouseCoopers and the Urban Land Institute.

Oregon’s commercial real estate market is frozen, paralyzed by cautious lenders and investors holding on to their assets waiting for real estate prices to continue falling. Grubb & Ellis, one of Portland’s largest real estate services and investment firms, estimates that commercial sales volume in Oregon fell to $1.7 billion in 2008, down from over $2 billion in 2007.

“Investments across the board have come to a screeching halt,” says Patricia Raicht, VP Client Services Manager for Grubb & Ellis. “There is no money to buy anything.”

This scares investors and brokers alike, who see the freeze in the credit market as particularly worrisome given the amount of commercial real estate debt that exists on the market.

The $700 billion bank bailout will do little to ease the credit crisis until banks begin to invest money back into the market, says Christine Kosydar, a partner at Stoel Rives, which specializes in business finance and real estate law. Banks are sitting on their money, waiting to purchase discounted portfolios to offset past losses, she says. Until then “they won’t be making any loans. They won’t be refinancing much at all.”

Vacancy rates for office, industrial and multifamily rose in the fourth quarter of 2008. Industrial and multifamily vacancy rates rose to 12.11% and 4.1% respectively. Portland’s central city office vacancy rates rose slightly to 9.25%, while suburban office vacancy rates rose to 16.17%.

Retail vacancy held steady at 5.8%, although industry experts predict this number will continue to rise in 2009 as heightened profits from holiday sales give way to post-holiday sales drop-offs.

NICOLE STORMBERG



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