Lancaster PA Commercial Real Estate

A pair of recent reports presents mixed outlook for 2010

A recent report by CoStar indicates an uptick in sales volume:

“Grubb & Ellis in its annual outlook is predicting an increase in sales volume of 20% to 30% over 2009 levels. However, prices, already down 40% from their peak in October 2007, may decline another 10% to 20% in order to meet buyers’ expectations.” – CoStar – Full report.

Loopnet cites a National Council of Real Estate Investment Fiduciaries’ NCREIF Index that corroborates the outlook of lower values in 2010:

“Property values will continue to fall and investment returns will remain negative through 2010, according to CBRE Econometric Advisors.”  LoopNet – Full Report

The Patriot News reports parent company of Harrisburg-based Graystone Bank to acquire First Chester County Corporation.  This action strengthens the widely held notion that Graystone Bank is currently one of the few local banks looking to do deals.  In a recent conversation, a Graystone LO recently remarked to me that “we are here and healthy” and that they are looking for deals that make sense.

These statements highlight what I see as the current commercial lending climate in Lancaster County:  You can get financing for your commercial deal if your project pencils (debt coverage ratio greater than 1.2), you have sufficient down (20% or greater) and a track record of previous success.

via Parent company of Harrisburg-based Graystone Bank to acquire First Chester County Corporation | Breaking Midstate News with The Patriot-News -.

Loopnet reports that:

The delinquency rate for commercial mortgages held by four of the five major investor groups surveyed by the Mortgage Bankers Association continued their climb in the third quarter. Only Freddie Mac didn’t see an increase in delinquency. The rate for loans more than 90-days late stayed flat at 0.11%. That compares with 0.09% at the end of the first quarter and 0.01% in the third quarter a year ago. CMBS loans ended the quarter with a 4.06% delinquency

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The Commercial Leading Indicator for Brokerage Activity1 rose 0.9 percent to an index of 102.4 in the third quarter from 101.5 in the second quarter, but is 11.1 percent below a reading of 115.3 in the third quarter of 2008. The index in the second quarter was at the lowest level since the first quarter of 1994; NAR’s track of the commercial leading indicator dates back to 1990.

via Commercial Real Estate Forecast Uncertain.

South Central PA economists weigh in on how the economic recovery is likely to proceed.  Today’s headline of much lower unemployment is on track for an employment bottom and subsequent recovery in early 2010.  Below find and excerpt and link to the full article.

Dye, vice president and senior economist for The PNC Financial Services Group, said the recovery likely would be a gradual “U-shaped recovery,” rather than a sharper “V-shaped” one. Basu, however, noted about one-third of economists are predicting a “double dip,” a second downturn.

via Two economists predict recovery, question endurance – Central Penn Business Journal.

Further indication that the job loss curve is approaching a trough.  When the curve goes flat – i.e. net job loss is zero – this will forecast the recovery of commercial lease rates and hence commercial property values.

Nation losing jobs at a slower rate, two reports show – Nov. 4, 2009.

I am not calling it yet – but this could be the beginning of the jobs growth indication that will herald a commercial real estate price recovery.  Readers of my blog will know to look for price recover in commercial/industrial leasing and property values 6-9 months after they see confirmed net job creation announcements.

Manufacturing in ‘recovery mode’ – Nov. 2, 2009.

Is anyone else seeing net job creation news?

Decline in commercial real estate sector is slowing