CRE Cliffnotes (8.27.10)

Good News for a change. (More CMBS Borrowers Pay Off Balloons in Time)
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• Two Sentence Overview: CMBS borrowers successfully paid off 49.9% their balloon mortgages on time in July (the highest percentage since 2008). This is due to new found liquidity (in the form of foreign wealth funds, insurers, pension funds, and even some CMBS issuances) and record low interest rates.
• One Sentence Takeaway: While this is far too early to be a trend, this is definitely good news as the combination of funds from other equity sources and low interest rates are lessening the likelihood of the whole “next shoe to drop” scenario.

Office prices have declined 30.8% since 2Q 2007:
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• Two Sentence Overview: Uncertainty in the broader economy has led to a drag in investment activity. However, the number and dollar volume of commercial real estate transactions is increasing.
• One Sentence Takeaway: As trades increase we can be more confident that buyers and sellers are coming to an agreement on price (i.e. a bottom), however there is allot of cash chasing too few deals which makes this whole “buyer/seller agreement on price” thing difficult.

C&W Houston Office 2Q Market Beat:
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• Two Sentence Overview: This is a good one pager from C&W saying Office Class A space is likely to increase in vacancy, especially in the CBD, as vacant sublease space continues to come onto market through the rest of the year (Ugh). The “triple threat” of the drilling moratorium, the Continental/United Merger, and the status of NASA still has a lagging effect on the Houston economy.
• One Sentence Takeaway: With very little construction, we can at least look forward to a recovery that does not have an supply problem when the economy comes back and there is more certainty from these three core issues.

Infamous Houston Office WSJ Article:
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• Two Sentence Overview: I am sure many of you saw this badboy on the WSJ, filled with color on the whole “triple threat” story. I looked for the positives in the article and at least Houston has a employment rate one point lower than the U.S.
• One Sentence Takeaway: Ok, ok, so there are hurdles we need to overcome…we will…and the space market will be stronger because of it as there will be very little new product out there once there is sustainable job growth.