Turmoil in the credit markets and economic weakness has virtually frozen the commercial property markets, with buyers reluctant to commit as prices fall and sellers refusing to deal unless forced to by financing constraints, a panel of real estate financiers said Wednesday.With vacancies predicted to rise for nearly all property types and rents expected to fall, office, retail, hotel and industrial holdings are likely to drop in value in the coming year, making it difficult to underwrite any transactions, the panel of experts said at a meeting of the Urban Land Institute here.
"It's like a time out: Nobody wants to do anything until they can see with a little more clarity," said Michael Fascitelli, president of Vornado Realty Trust. "It is very hard to operate in this environment of volatility we're seeing. It's like we've been hit with a 100-year flood 15 times in the last two months."
Vornado, a publicly traded real estate investment trust that owns more than 100 million square feet of property, has lost about $10 billion in market capitalization in the last year as REIT shares have been battered by the spreading financial crisis.
"I don't think this is a blip. We've gone far past a blip," said Randy Reiff, senior managing director for J.P. Morgan in New York. "We're in a protracted, massive restructuring of our capital markets. Even the lenders who are out lending are slowing down right now. And that is only the people who are accustomed to high-risk, opportunistic investing who don't believe they have to buy at the bottom."
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