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Commercial Properties Squeezed

Owners of malls and office buildings are starting to feel the subprime pinch

By Jim O'Neill,  Newser User

Posted Dec 26, 2007 8:05 AM CST
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(Newser) – Add the once-solid commercial real estate market to the list of sectors felled by the subprime mortgage contagion, as owners of malls, apartment complexes and office buildings have seen financing disappear, prices plunge and the pace of sales dwindle 50%, reports the Wall Street Journal. Lenders, burned by the residential debacle, have become reluctant to risk commercial exposure.

Sales are so slow experts are struggling to set prices on buildings. Nearly all agree values are dropping, even if sellers have not yet marked down their properties. Lenders, worried about defaults, have raised rates to the point of being unaffordable. Mall-owner Centro Properties Group is one company caught in the crunch. Unable to refinance short-term debt, it saw share prices plummet 90% in two days.

A pedestrian walks past the entrance of the Westfield Century City Shopping Center Thursday, Nov. 8, 2007, in Los Angeles.
A pedestrian walks past the entrance of the Westfield Century City Shopping Center Thursday, Nov. 8, 2007, in Los Angeles.   (Associated Press)
Shoppers ride an escalator at the South Shore Plaza shopping mall, in Braintree, Mass., in this Sept. 6, 2007 file photo.
Shoppers ride an escalator at the South Shore Plaza shopping mall, in Braintree, Mass., in this Sept. 6, 2007 file photo.   (Associated Press)
Shoppers stroll around the Westfield Century City Shopping Center Thursday, Nov. 8, 2007, in Los Angeles.
Shoppers stroll around the Westfield Century City Shopping Center Thursday, Nov. 8, 2007, in Los Angeles.   (Associated Press)
The skyscraper at 666 Fifth Ave. stands on Fifth Avenue near 53rd Street December 7, 2006 in New York City. The Kushners, a New Jersey real estate family, will buy the building from Tishman Speyer Properties for $1.8 billion, setting a new record by $800 thousand. Tishman Speyer spent...
The skyscraper at 666 Fifth Ave. stands on Fifth Avenue near 53rd Street December 7, 2006 in New York City. The Kushners, a New Jersey real estate family, will buy the building from Tishman Speyer Properties...   (Getty Images)
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Grand plans, despite slowdown
Wall Street Journal

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subprime mortgages • office buildings • commercial paper • real estate values • commercial real estate

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