Further signs of a recovering economic environment emerge in the US as Manhattan’s office vacancy rates have dropped for the first time in three years and defaults on some of the US commercial property loans (mortgage-backed bond securities, known as CMBS) that fuelled the financial crisis hit a six-year low last year.
As reported by the Financial Times (FT), international property agents Cushman & Wakefield say that almost 7 million square feet of Manhattan office leases were signed as a recovering economy and low borrowing costs helped the commercial property market recovery.
According to rating agency Fitch, the annual loan default rate slipped from 0.9 per cent in 2013 to 0.6 per cent last year, the lowest figure since 2008, and according to Barclays, new loan issues have picked up from $90bn in 2014, and are expected to hit $110bn this year.
US commercial property prices are now back above the pre-crisis peak, and have so far outpaced the recovery in US residential real estate. Aaron Haan, a strategist at Barclays told the Financial Times (FT) “We’ve seen an improvement across the board. The economic recovery, helped by low interest rates, has helped keep new delinquencies down.”
But with the threat of a likely rise in interest rates from the Federal Reserve and a “refinance wall” made up of loans first extended in 2005-07, Mr Haan has predicted a “modest” increase in the number of CMBS loan defaults next year and in 2017.
These will likely affect most those shopping malls, hotels and office buildings outside of the major city centres, as some of the leveraged deals structured at the peak of the property boom come due for repayment.
Further Signs of a Recovering Economic Environment Emerge in the US – http://t.co/1bGFwyTPEf
— LandlordZONE U.S. (@LandlordZONEUS) April 13, 2015