Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash

[FarCenter]

Source: Bloomberg

By John Gittelsohn and Thomas R. Keene

Oct. 30 (Bloomberg) -- Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate -- the return that investors are demanding to buy a property -- are going up.”

U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc. The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.

Billionaire George Soros, speaking today at a lecture organized by the Central European University in Budapest, said a “bloodletting” may be coming for leveraged buyouts and commercial real estate.


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aoRYl03Rw1_g

[BeatleBoot]

1. Do you know who Wilbur Ross is?

He's the guy who bought up bankrupt steel in Pittsburgh

And the guy who bought up bankrupt Auto Suppliers in Detroit.

My former employer, who went Ch 11 was sold in pieces to this guy.

It behooves him to talk up this slide, because his company is the vulture that swoops in and buys it at low cost.

But, if Soros says its so, then I believe it.

My 2 cents.




On edit: spelling, grammar

[FarCenter]

2. Oh yes, he's one of the biggest vulture capitalists

Good at spotting the carrion too.

[Raster]

3. True dat. Unfortunately if he says there will be death and mayhem...

[Javaman]

4. no duh. anyone that has been paying attention knows this.

try checking the web site dead malls sometime.

[salin]

10. I just checked that site out...

striking that a number of the included malls were built relatively recently (within the last 15 years.) The dying ones around here are older (built in the 60s) and suffered from the development of higher end malls and over development of strip malls near all of the malls.

So much money flushed away (from over development).

[winyanstaz]

5. Main street in my little town is looking like a ghost town already...

Of course there is still a big crash in this area as well as the credit card area and it is already started.
We aint seen nothing yet America and we neeed to start doing more to help each other and start doing it now.
Plant a garden this coming spring. Plant enough to also give to the local food bank.
Learn to can and dry and preserve food.
Barter.
If your a landlord..stop being so frikking greedy and lower the rents in any way you can!
If your a utilities companies...lower the frikking rates!
If you are one of those that made this mess.....you better get set to take a big pay cut soon or buy a one way ticket out of Dodge you assholes.

[bobshin]

6. This may actually not such a bad thing...

People will still need to buy things even if it's less than it's been. Small businesses are better able to adjust quickly to the market- big boxes will not. Urban centers will see more of a surge as higher concentration of people who can't afford to drive will walk to shop. Businesses that own instead of lease will be better positioned. And the local redundant mall that's about to be built may finally die in spite of strong and organized local opposition before the first foundation gets poured. All in all may be a good thing for small businesses the (former) foundation of our country.

[PerceptionManagement]

13. You'd still prefer to own? Really?

Regardless, business leases were obscene before the crash. In a cut-of-your-nose kind of way, I'm glad the karma train is coming around to that market.

[patrice]

7. There're strip malls around here 3-4 yrs old & never been occupied. Do developers get a tax writeoff

for that sort of thing?

[BR_Parkway]

9. A bigger thing is that the banks just kept extending the loans so they

didn't have to report them as bad and set aside more loan loss reserves. It was an artificial way to keep them looking better capitalized.

[AtheistCrusader]

8. Who the hell DIDN'T see this coming a year and a half ago?

[PurityOfEssence]

11. There's also much less NEED for commercial property

People work from home on their computers. They shop on the internet. They've been driven down the economic ladder by outsourcing that they don't have enough to spend anyway.

People already have servicable computers, TVs, appliances and other devices that they bought in the spending spree of the last few years; they can get by. The huge technological shift of the computer age has been made, and even if people will grumble and soldier on with mere examples of first generation hardware, they'll muddle through somehow and won't really miss anything.

Somehow many think we dodged the big bullet a year ago, but the economy is built on so many false assumptions and overleveraged that pain is a' comin'...

[Jkid]

12. Problem is what about people who don't have computers?

They're not cheap

[patrice]

18. All of that empty office should be turned into "education malls", open 8a-8p, with

public computers for all comers and then small business start-ups could enroll in small business classes and earn educational credit for developing and implementing their (independent/non-franchise) business plans, with one of the gradable requirements being a plan that succeeds in earning enough money in a self-specified amount of time to purchase its own computer and prepare to become a home-based business.

A community's educational malls could be distributed across a community, or combined into central locations. I think they should be funded as public schools, but without the attendance requirements on the money. The schools should receive an appropriate amount of money and then teach those who show up. They should be open to anyone, any age, who develops, implements, and shows progress on an educational plan that includes specifically defined nearly universal functional basic skills and cultural orientation, and then self-selected enrichment that can include everything from trades and crafts to college courses. They should offer a full spectrum of certifications, not just graduation diplomas. And, though assessment and evaluation should be authentically relevant to the individual learner, the processes by means of which authentically evaluated student products are translated into grades should be based upon consistent formulae defined, in part by the individual, in part by the individual's local community, and in part by the community's super-ordinate community (which could be something like the state, the fed, or a nationally recognized set of professional standards).

[mule_train]

20. yup - a great place for workers to train their foreign replacement, without impeding production

education is NOT the problem!!!!!

the USA has, and has had for decades a SURPLUS of trained, often 'overqualified' people

[patrice]

21. One specific objective is to implement local entrepreneurship communities.nt

[patrice]

22. P.S. How intimately are you acquainted with public "education"? it is most definitely a

problem or do you think that the things that produce empty obsolete commercial properties happen in a context that is not affected by education?

[mule_train]

23. to attempt to answer your strangely worded question

"problem or do you think that the things that produce empty obsolete commercial properties happen in a context that is not affected by education?
"

these policies were produced by economists from Harvard

if anything it's a case of trusting 'education' more than common sense

and my experience comes from being an interviewer receiving a FLOOD of resumes in tech for each and every job, even in the 90s, all qualifed, many over qualified

[patrice]

24. Please specify that which you find "strange". Perhaps I can help you.

[patrice]

25. P.S. That's a rather selective sample isn't it?

[mule_train]

26. it's the one i know personally, and it's the most cited example of lack of education

and i know personally that it's BULLSHIT

[patrice]

27. Now you have me confused. Are you saying that the tech example you used is an example

of bullshit?

Or the "educated" Harvard economists are an example of bullshit?

In either case, I suspect that you and I are looking at "education" from opposite perspectives, yours = micro, mine = macro.

[patrice]

28. P.P.S. And of course you are aware of the dangers of inferring generalities from particulars(?)

[mule_train]

14. Wilbur is the only one worth listening to

all kidding aside, I've never seena anything like this

see throughs all over the place

[robo50]

15. In my town, we have tens of thousands of empty office and commercial

space.

I want several tens of thousands of them converted into housing, schools, clinics, and public assembly spaces.

The town fathers just think their 150 year old town hall should be overhauled with millions in public expense to make it air-conditioned, and ready for the best wireless internet access. All the while, we have buildings ready to deliver that today.

Some people don't see the obvious, homeless people 10-20 miles away, lots of empty space in my town, shortage of elderly and handicap access housing, buildings ready to go in a month for that purpose.

[ozone_man]

16. And some think the recesson is over?

The commercial real estate tanking will help fuel the second leg of the "W" recession. But, it's not going to be a "W", because the next leg down is going much deeper. Lower highs and lower lows all the way down.

[pfitz59]

17. a quick glance around town.....

shows half the store fronts empty, with nary a new tenant in sight! oh, yeah, the bottom has dropped out!

[Crowman1979]

19. Hopefully this will influence people to move their businesses toward a city's downtown area.

Rather than have it flung out where have to drive almost an hour to find a place to shop.

[Sen. Walter Sobchak]

29. In many places there is no "downtown"

Where I live the only "downtown" is where the chamber of commerce painted a water tower in the middle of nowhere to say downtown,

[Sen. Walter Sobchak]

30. the building I work in is collateralized for 160% of its market value

and that loan was used to build a strip mall somewhere along I-10 which I am guessing is empty, we want to buy the building but the owners can't sell it. Should be fun times ahead!

[sendero]

31. It doesn't take a billionaire investor or a weatherman.

.... to see this wind blow.

The CRE crash has been inevitable for months. When businesses go kerplunk, they can no longer pay for space.

My wife works in a business that puts her in contact with property managers of large office buildings here in Dallas.

You don't hear about it on the news, but buildings are going into foreclosure already. Everyone in the biz is stressed out. And this is just getting started, all you pollyannas out there.

[unkachuck]

32. Does this mean skyscrapers will have Chinese names?....n/t