? The commercial real estate market has followed the larger economy into a downturn that is likely to last through 2009 and possibly into 2010. With unemployment rising, consumer spending falling and home prices dropping, the recession will impact all sectors of the real estate market
? It is not yet clear when commercial mortgage debt will be readily available. The CMBS market is out of the picture and traditional lending sources are trying to preserve capital. The lack of reasonably priced debt has made it difficult to complete transactions.
? Tarred with their association with financial firms and use of mortgage debt, shares of U.S. REITs fell amid unprecedented volatility in 2008. The sector should gain in 2009, but remains subject to the performance of the
economy and the debt capital markets.
? After falling to historical lows of roughly 5.4% in 2008, cap rates are likely to return to levels more in line with the 7.8% National Council of Real Estate Fiduciaries (NCREIF) historical average. Combined with declining net operating income, property values will drop sharply from their peaks.