Commercial real estate is the next shoe to drop and recovery is a long way out

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usctrojanman29_IHB

usctrojanman29_IHB

New member
I can tell you guys from personal experience that commercial real estate is starting to come down the cliff. The most apparent pain now is being felt in secondary and outlining markets (central valley california, oregon, phoenix, las vegas, texas, etc) and it won't be long before it spreads to the high dense areas like downtown LA, West LA, SF, Seattle, etc. Here are some interesting articles that provide some more clarity of what I'm talking about...

http://www.costar.com/News/Article.aspx?id=E39BD17CE2632DDC6CC542B4B3145EDA

http://www.caswell.org/newsletters/20090317page1.asp?vid=3405&dlid=203
 
Retail is getting clobbered. Apartment owners who thought that people getting foreclosed would mean their vacancies would go down are finding vacancies at a near all time high. Rents will be forced down. We just signed a deal in Corona our light industrial that lowered our rent from 1.05 to .65 per square foot. I thought I would get ahead of the market istead of chasing it down with a vacancy. Other landlords looking at the comps must hate me. Don't even talk to me about office space right now. In fact you should be able to lease office space and just move in and live there to save money compared to apartment space. People have been doing the same thing with light industrial space for years.
 
Is there anything left to the Ontario Mills?

Retail Blowing Out too Fast to Record - Ontario Mills

(embedded video no longer available)

Is the worst over?
 
??? said:
Is there anything left to the Ontario Mills?

Retail Blowing Out too Fast to Record - Ontario Mills

(embedded video no longer available)

Is the worst over?
Click to expand...
I think Ontario Mills also got hurt because of Victoria Gardens.
 
skek said:
usctrojanman29 said:
??? said:
Is there anything left to the Ontario Mills?

Retail Blowing Out too Fast to Record - Ontario Mills

Is the worst over?
Click to expand...
I think Ontario Mills also got hurt because of Victoria Gardens.
Click to expand...

Ontario Mills got hurt because it's in Ontario.
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haha Well that is obvious, but it is an aging retail center and when Victoria Gardens opened a few years back it was another death blow to the Mills. In today's retail market, it is the malls that are suffering the worst. I work across the street from the Brea Mall and when I go in there for lunch to the food court I can see how dead it really is. Neigbhorhood grocery/WalMart anchored retail centers will fair the best in the retail sector.
 
I went to a Christmas party for a So. Cal. Structural Engineers association. One of the senior board members sat next to me at lunch, and was telling me his customers were not planning on even looking at doing any new development untill 2010. He asked my opinion, and I told him I thought we were just getting started in the downslide. I think we have enough slack capacity to house retail needs for at least 15 years, assuming that the structures last that long.

Strip malls don't stand up very well without tennants because stuff like roof leaks don't get addressed if the space is vacant.

I disagree about Victoria Gardens. The mall is upscale (OM isn't) and the parking sucks. I went there once when it opened, and won't return. Ever.
 
no_vaseline said:
I went to a Christmas party for a So. Cal. Structural Engineers association. One of the senior board members sat next to me at lunch, and was telling me his customers were not planning on even looking at doing any new development untill 2010. He asked my opinion, and I told him I thought we were just getting started in the downslide. I think we have enough slack capacity to house retail needs for at least 15 years, assuming that the structures last that long.

Strip malls don't stand up very well without tennants because stuff like roof leaks don't get addressed if the space is vacant.

I disagree about Victoria Gardens. The mall is upscale (OM isn't) and the parking sucks. I went there once when it opened, and won't return. Ever.
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Yeah, whoever came up with the parking design and the ones who approved the site plan at the city/county level need to be kicked in the nuts. I think they were going for that "main street" type of theme through the main part of the mall. It's like they couldn't decide whether to design a mall or a power center and came up with a mutant hybrid. You can thank Lewis Retail for VG.
 
BlackVault CM2 said:
I like Victoria Gardens. I never had issue with parking either, then again I'm willing to walk 50 yards.
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Go when they are busy sometime. We went to the Yard House, and wound up walking for a good 10-15 minutes just to learn that there was a line of another 45 to get in. We thought about it for thrity seconds, and bailed. It took another 10 to get back to the car and another 10 to get out of the parking lot.
 
no_vaseline said:
BlackVault CM2 said:
I like Victoria Gardens. I never had issue with parking either, then again I'm willing to walk 50 yards.
Click to expand...

Go when they are busy sometime. We went to the Yard House, and wound up walking for a good 10-15 minutes just to learn that there was a line of another 45 to get in. We thought about it for thrity seconds, and bailed. It took another 10 to get back to the car and another 10 to get out of the parking lot.
Click to expand...

I hope you are not actually driving through VG, I don't think you are though. I did that once, and nearly lost it.

I agree with you completely, however perhaps I should have noted that if you use the back entrance and park there you'll have a much much easier time getting around. I find the back parking pretty empty compared to the front one. It's the area by that big outdoor sporting goods store and Lucilles BBQ. The yardhouse/crate n barrell entrance can be a pain. The only time I found it to be a pain was during X-mas time, but kinda worth it. I liked their x-mas decorations and ambiance. That place definately belongs to OC not IE.

But perhaps we are going different times and had different experiences. My wife and I still go there about once a month, but when we lived in the IE it was quite often as it was about the only place that felt half normal other than going to OC.
 
I habitually avoid malls, chain resurants, department stores so I'm not exactly the demographic. Mostly because I don't stand in lines and don't like crowds. Somebody told me they have meds for this...........
 
The trend in retail seems to favor open air “lifestyle” centers like VG over the more traditional enclosed malls (Ontario Mills).

The Grove in LA is extremely popular and taken a lot of traffic and people away from the Beverly Center.

Never been to VG.

Places like Ontario, west of the 15 in the IE seem to be desirable and have appeal.
 
BondTrader said:
I've just finished an analysis for the upper management, just 2009 YTD CMBS downgrades totaled $80bn, RMBS $60bn......
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For all life insurance companies, the downgrades reduced their RBC (risk based captial) by $1.2bn/1.5bn, good luck raising money to fill that hole.... here comes TARP II
 
BondTrader said:
BondTrader said:
I've just finished an analysis for the upper management, just 2009 YTD CMBS downgrades totaled $80bn, RMBS $60bn......
Click to expand...

For all life insurance companies, the downgrades reduced their RBC (risk based captial) by $1.2bn/1.5bn, good luck raising money to fill that hole.... here comes TARP II
Click to expand...

Everything becomes a bank holding company and has access to FED window.
 
Hat tip to Yves Smith over at Naked Capitalism for finding this snarky chartpr0ntastic gem on CMBS.

Commercial real estate is nothing more than a proxy for the intersection of the two historically core driving forces in the U.S. economy: real estate values and business conditions. And as the facts above indicate, the deterioration is only starting to pick up.

But what about all the stimulus programs skeptics will ask? The bail out packages? The constant funneling of taxpayer money into every underperforming segment of economy?

The truth is that the more taxpayer money is dumped to try to fill the abyss, it may become marginally shallower, but only at the expense of it getting wider. At some point soon (if not already), the U.S. economy will be unweenable from the trillions and trillions of taxpayer subsidies all the while it becomes more indebted to both its investors and taxpayers, further exacerbating the abovementioned paradox (presumably not without a motive). As the multi-trillion CRE crash continues to deplete the left side of the financials' balance sheet with an exponentially growing pace (and I have not even touched on the credit card topic), the banks will be left scratching their heads what accounting rules to bend, which insurance companies to implode and get another AIG-like piggybank, how to break REG-FD more and more creatively with select memo leaks, how to manipulate the market, and how to make the Tsy curve becomes even more upward sloping with the compliments of the Fed and the Treasury. In the meantime the disinformation rift between the American taxpayers and investors will keep growing until inevitably, one day, it will escalate to the point where empty promises on prime time TV by the administration's photogenic representatives will not suffice, and real actions that benefit future American generations will be demanded... What happens after I have no idea.
 
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