Not surprising to well-informed Commercial Real Estate Brokers, the CMBS market has weakened over the course of 2008. The popular CMBS market helped finance many commercial transactions for hotels, office buildings, and shopping centers. Now there is speculation that this market will collapse on the premise of the default of only two big commercial mortgages. Well, it will take more than two failed loans to bring down financing for commercial real estate.
As we all know, any commercial real estate investment is scrutinized by the brightest businessmen and the most intelligent investors. The fancy speadsheets, complex algorithms, and intricate projections all help mitigate the risk involved in multi-million dollar projects. If investors continue a disciplined and analytical approach to their acquisitions and dispositions of assets, the market shall weather this storm just fine.
Now, lets look at the delinquency rate, which is truly a bellweather for the industry. Delinquencies on commercial real estate debt rose to 0.78 percent in October, from 0.66 percent in September according to RBS Greenwich Capital data.
According to Mary MacNeill, managing director at Fitch "they’re still much lower than they were a few years ago.They would still be in line with the historical average, which is 0.78% to 0.79%.”
Now, even with a delinquency rate at 0.78 percent, we're still in line with the historical average; and average is far from a crisis. (Bear in mind that delinquencies are not defaults!) Those who are afraid can take the news and burn it to fuel their fears and make irrational decisions. Those of us that know the historical data, understand the real estate cycle can make informed investment decisions and still profit in this down-market.
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