Vacancy rates, commercial mortgage defaults on the rise - Business First of Columbus:

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On the heels of reports showing higherd vacancy rates in the offices and industrial markets in all three ofthe region’se counties, another report showed higher delinquency rates for commerciak properties. In looking at the $16.09 billion in commercial mortgage-backed securities in Soutbh Florida, Horsham, Pa.-based found that 1.94 percent of them were delinquenftin March. That’s up from 1.04 percen in December. Realpoint put 20.1 percenty of the South Florida CMBS loanes on its watchlist – meaning the research company has flaggeed payment defaults, loan maturity risk, low occupancy levels, poor borrower finances or other material issues. That’d up from 19.
4 percent on the watcgh list in December. Both of thosse measures came above the national averagesof 1.72 percen t delinquency and 19.1 percent on the watch As of Dec. 31, commercial mortgages held by banks and thrifte were actually in worsd shape thanCMBS loans, with a 2.7 percent delinquency rate. Frank Innaurato, managing director of CMBS researchyfor Realpoint, predicted that delinquency of thesw securitized loans would more than double by the end of 2009. Many commerciak properties were underwritten at such inflatexd values that their debtservice can’t support the cash he said.
“Borrowers are crying poor and cominh back to lendersrequiring forbearance, debt service relief or changes in interestf rates,” Innaurato said. “Some of it is beingg caused by the tenant base coming to borrowers in the retai l or office front and asking to renegotiate the lease s sothey don’t go out of In other cases, commercial loans mature and properties can’r obtain new financing, he said. Commercia foreclosures have been sweeping acrossdSouth Florida. Among the largest commercial projectz facingforeclosure suits: Miami Airport Center, a 597,901-square-foot office/warehouse complex near .
Coralp Landings III, a -anchored shopping center in Coral Springswith 114,95 square feet completed and nearly 50,000 squar feet under construction. A 137,066-square-foot formert call center building in Boca Courthouse Commons, a new 99,395-square-foot Class A officed building in downtown West Palm Beach. The 417-room Royal Palm Hotel in Miami Beach. The first quarter South Florida market view by showed that the offices vacancy rate climbedto 23.8 percentg in Palm Beach County, 15 percent in Browarcd County and 11.4 percent in Miami-Dade County.
The credit crunch has hurt commerciaolreal estate, but the default rate won’t come anywhere near the problemsz facing residential real estate, said Rick South Florida managing director for CB Richard Ellis. “Thre fundamentals on the commercial side remain pretty he said. Many financial institutions don’t want to take over commerciapl properties, and are instead reworking loans, putting them into receivership or encouraginga sale, Mille r said. Realpoint’s Innaurato noted that the number of CMBS loansd late on payments has increased nearly twice as fast over the past six monthsw as the number of themin Meanwhile, there are 1.
8 million squard feet of commercial projects under construction in downtown Miamiu and the Brickell area that should be readyt in 2010, with 13 percent preleased, the CBRE report stated. Much of the speculativw space coming online won’t be absorbed for years, said Michaeol Adler, chairman and CEO of the , a Miami-based commercial property owner. “Until there is a growing economy, you’rre not going to have a need for space,” Adler “We’re in for quite a few yearsx of fairly high vacanciesz in theoffice