By SHAWN A. TURNER
3:02 pm, October 31, 2007
For the second time this year, the Federal Open Market Committee has reduced the federal funds rate by a quarter-point, this time to 4.5%.
In lowering the rate, which is the rate banks charge either other for overnight loans, the Fed said in a statement that it hoped to protect the economy from “disruptions in financial markets.”“Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance,” the Fed said.
“However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction.”Reacting to the news, at least one Northeast Ohio bank lowered its prime lending rate. Cleveland-based KeyCorp dropped its rate to 7.5% from 7.75%.
Wednesday, October 31, 2007
Friday, October 26, 2007
Office, retail boost building sales
Commercial sector unhurt by residential mortgage mess
By Dan Caterinicchia Associated Press
Published on Friday, Oct 26, 2007
WASHINGTON: The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat.
Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York real-estate research firm.
Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month.
There are some signs of slowing growth, analysts say, but nothing compared with the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers.
The commercial market has not been dragged down by the residential mortgage mess because for the most part, buyers and sellers are more sophisticated, and they have more financial flexibility and resources to ride out credit-market turmoil, experts said.
''It's a different animal with the direct relationship between banks and business leaders, not banks and homeowners,'' said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.
That doesn't mean the market would be unaffected if economic growth stalls.
''As home prices continue to fall, people feel poor and spend less,'' and that puts pressure on the profits that fuel corporate spending, said William Wheaton, research director at the Massachusetts Institute of Technology's Center for Real Estate. He puts 50-50 odds on a mild recession in the U.S. within the next six months.
Economic data due out soon is likely to show that September was one of the slowest months in several years for all areas of commercial real estate from apartment buildings to retail properties, according to Real Capital Analytics.
If the broader economy stumbles, the commercial real estate market would be vulnerable to ''credit-risk contagion,'' Wheaton said. Already, the credit crunch that started in mortgages has spread to other markets, including the commercial
market, with some sellers asking for more capital up front when mortgage-backed assets are financing a transaction.
Projects in Midwestern cities dominated by individual investors have seen prices plateau and capitalization rates rise compared with developments in New York, Washington and San Francisco, where institutional and foreign investments remain stable, said Dan Fasulo, managing director of Real Capital Analytics.
Risk premiums also are up, which means commercial real estate investors can't get sellers to finance as much debt as before. And there has been an ''above-normal flow'' of lodging project cancellations and postponements, even though the increase is ''not excessive or alarming,'' said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H., real estate consulting firm. Speculative deals or developments with marginal profits are ''dead,'' Wheaton said.
Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.
As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.
A recent example: Host Hotels & Resorts Inc., the nation's largest lodging real estate investment trust, this month reported third-quarter results that beat Wall Street estimates on improved occupancy and lodging rates.
WASHINGTON: The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat.
Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York real-estate research firm.
Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month.
There are some signs of slowing growth, analysts say, but nothing compared with the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers.
The commercial market has not been dragged down by the residential mortgage mess because for the most part, buyers and sellers are more sophisticated, and they have more financial flexibility and resources to ride out credit-market turmoil, experts said.
''It's a different animal with the direct relationship between banks and business leaders, not banks and homeowners,'' said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.
That doesn't mean the market would be unaffected if economic growth stalls.
''As home prices continue to fall, people feel poor and spend less,'' and that puts pressure on the profits that fuel corporate spending, said William Wheaton, research director at the Massachusetts Institute of Technology's Center for Real Estate. He puts 50-50 odds on a mild recession in the U.S. within the next six months.
Economic data due out soon is likely to show that September was one of the slowest months in several years for all areas of commercial real estate from apartment buildings to retail properties, according to Real Capital Analytics.
If the broader economy stumbles, the commercial real estate market would be vulnerable to ''credit-risk contagion,'' Wheaton said. Already, the credit crunch that started in mortgages has spread to other markets, including the commercial
market, with some sellers asking for more capital up front when mortgage-backed assets are financing a transaction.
Projects in Midwestern cities dominated by individual investors have seen prices plateau and capitalization rates rise compared with developments in New York, Washington and San Francisco, where institutional and foreign investments remain stable, said Dan Fasulo, managing director of Real Capital Analytics.
Risk premiums also are up, which means commercial real estate investors can't get sellers to finance as much debt as before. And there has been an ''above-normal flow'' of lodging project cancellations and postponements, even though the increase is ''not excessive or alarming,'' said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H., real estate consulting firm. Speculative deals or developments with marginal profits are ''dead,'' Wheaton said.
Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.
As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.
By Dan Caterinicchia Associated Press
Published on Friday, Oct 26, 2007
WASHINGTON: The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat.
Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York real-estate research firm.
Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month.
There are some signs of slowing growth, analysts say, but nothing compared with the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers.
The commercial market has not been dragged down by the residential mortgage mess because for the most part, buyers and sellers are more sophisticated, and they have more financial flexibility and resources to ride out credit-market turmoil, experts said.
''It's a different animal with the direct relationship between banks and business leaders, not banks and homeowners,'' said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.
That doesn't mean the market would be unaffected if economic growth stalls.
''As home prices continue to fall, people feel poor and spend less,'' and that puts pressure on the profits that fuel corporate spending, said William Wheaton, research director at the Massachusetts Institute of Technology's Center for Real Estate. He puts 50-50 odds on a mild recession in the U.S. within the next six months.
Economic data due out soon is likely to show that September was one of the slowest months in several years for all areas of commercial real estate from apartment buildings to retail properties, according to Real Capital Analytics.
If the broader economy stumbles, the commercial real estate market would be vulnerable to ''credit-risk contagion,'' Wheaton said. Already, the credit crunch that started in mortgages has spread to other markets, including the commercial
market, with some sellers asking for more capital up front when mortgage-backed assets are financing a transaction.
Projects in Midwestern cities dominated by individual investors have seen prices plateau and capitalization rates rise compared with developments in New York, Washington and San Francisco, where institutional and foreign investments remain stable, said Dan Fasulo, managing director of Real Capital Analytics.
Risk premiums also are up, which means commercial real estate investors can't get sellers to finance as much debt as before. And there has been an ''above-normal flow'' of lodging project cancellations and postponements, even though the increase is ''not excessive or alarming,'' said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H., real estate consulting firm. Speculative deals or developments with marginal profits are ''dead,'' Wheaton said.
Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.
As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.
A recent example: Host Hotels & Resorts Inc., the nation's largest lodging real estate investment trust, this month reported third-quarter results that beat Wall Street estimates on improved occupancy and lodging rates.
WASHINGTON: The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat.
Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York real-estate research firm.
Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month.
There are some signs of slowing growth, analysts say, but nothing compared with the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers.
The commercial market has not been dragged down by the residential mortgage mess because for the most part, buyers and sellers are more sophisticated, and they have more financial flexibility and resources to ride out credit-market turmoil, experts said.
''It's a different animal with the direct relationship between banks and business leaders, not banks and homeowners,'' said Bernard Baumohl, managing director of The Economic Outlook Group in Princeton, N.J.
That doesn't mean the market would be unaffected if economic growth stalls.
''As home prices continue to fall, people feel poor and spend less,'' and that puts pressure on the profits that fuel corporate spending, said William Wheaton, research director at the Massachusetts Institute of Technology's Center for Real Estate. He puts 50-50 odds on a mild recession in the U.S. within the next six months.
Economic data due out soon is likely to show that September was one of the slowest months in several years for all areas of commercial real estate from apartment buildings to retail properties, according to Real Capital Analytics.
If the broader economy stumbles, the commercial real estate market would be vulnerable to ''credit-risk contagion,'' Wheaton said. Already, the credit crunch that started in mortgages has spread to other markets, including the commercial
market, with some sellers asking for more capital up front when mortgage-backed assets are financing a transaction.
Projects in Midwestern cities dominated by individual investors have seen prices plateau and capitalization rates rise compared with developments in New York, Washington and San Francisco, where institutional and foreign investments remain stable, said Dan Fasulo, managing director of Real Capital Analytics.
Risk premiums also are up, which means commercial real estate investors can't get sellers to finance as much debt as before. And there has been an ''above-normal flow'' of lodging project cancellations and postponements, even though the increase is ''not excessive or alarming,'' said Patrick Ford, president of Lodging Econometrics, a Portsmouth, N.H., real estate consulting firm. Speculative deals or developments with marginal profits are ''dead,'' Wheaton said.
Fundamentals in the commercial market remain strong with rising rents and occupancy levels expected to continue, especially in metropolitan areas. And while overbuilding in residential housing is worsening the magnitude of the downturn, commercial markets are not in oversupply mode.
As the housing market struggles to regain its footing, the outlook for commercial real estate is mostly positive, and investors are reaping the benefits.
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