The commercial real estate rubble still left over from the Great Recession continues to exact a punishing toll on property values and owners’ and lenders’ books.
In this statistical state analysis, CoStar Group has identified 168,580 office, flex, industrial and retail properties in its national property database with a vacancy rate of 60% or more. The number of properties by type at this level of vacancy distress is as follows:
Retail: 67,525 properties
Office: 49,240 properties
Industrial: 42,475 properties
Flex: 9,339 properties
Of those properties, 4,700 or so last sold at peak-of-market values in 2007, and another 4,140 were built and came online in 2007.
Since Jan. 1, 2008, CoStar has tallied 16,265 commercial property foreclosure or deed in lieu of foreclosure transactions.
To help grasp the latest total number of distress properties, it is useful to compare the current levels with a similar analysis CoStar completed in September 2009. At that time, CoStar identified slightly more than 80,000 distressed office, industrial and shopping center properties, so the stack of distressed properties is double what it was two years ago.
Bank CRE Distress
The amounts of distressed commercial real estate bank and CMBS loans and foreclosed properties are also enormous.
At the end of 2011, U.S. banks held on to $27.9 billion in foreclosed commercial real estate, with more than half of that being construction and development projects, and another $10.5 billion of office, industrial, retail and hotel properties. The amount of REO multifamily properties was $1.4 billion.
In addition, U.S. banks held $91.7 billion in seriously delinquent CRE loans of which $19.1 billion had already been restructured at least once before.
By way of comparison, in September 2009 CoStar tallied more than $79 billion in seriously delinquent CRE loans and only $6.3 billion in foreclosed bank-held CRE properties.
In the CMBS universe, Morningstar Credit Ratings tallied the amount of CMBS loans in special servicing at the end of January 2012 at $82.3 billion. CMBS loans in special servicing consists of loans that are either delinquent in loan repayments or had reached maturity without pay off, or were current but had issues concerning ongoing credit problems with either tenants or borrowers.
In addition, Morningstar identified another $140.8 billion of loans that CMBS loan servicers listed as having potential credit concerns.
In September 2009, CoStar tallied specially serviced CMBS loans at $46.9 billion – again a near double the amount of two years ago.
Fannie Mae, Freddie Mac Distress
At the end of 2011, Fannie Mae reported having 385 seriously delinquent multifamily loans on its books with unpaid loan balance of about $1.1 billion. In addition, it owned 260 foreclosed multifamily properties valued at $577 million. By comparison, at the end of 2009, it held 73 REO properties valued at $265 million.
Freddie Mac at the end of 2011 reported $129.2 million in nonperforming loan assets compared to $104.5 two years ago. It held 19 multifamily REO properties valued at $20 million at the end of 2011 compared to six two years ago valued at $5 million.
For details on how to find distressed properties in your area, login to CoStar.com and click on the Knowledge Center tab. View our recently held “Finding and Analyzing Distressed Assets” webinar in the Webinar Archives.