Commercial Real Estate is struggling. Many of these properties were financed with loans that assumed ever growing rents. Now, rents have been decreasing since 2007 and some cases with large concessions in tenant improvements and free rents. The vacancy rate is high and with little or economic expansion in California, I think we will see more delinquencies.
While the amount of modifications on CMBS loans in 2010 has already passed the combined total of the last two years, the amount of serious-delinquent loans increased 20 bps in August to 8.15%. That includes loans in 60-plus day delinquency, foreclosure, REO or other nonperforming pools. A year ago, the rate of loans in serious delinquency stood at 3.08%
It should also be noted that construction usually helps leads the economy out of recession. With historically low real estate construction levels it will probably be as big as factor this recession.