Moody's Sees Stronger CRE Markets

The worst may be over for commercial real estate, according to Moody's Investors Service. Based on its quarterly Red-Yellow-Green report, both multifamily and shopping centers are expected to perform well over the next year, the hotel sector is strengthening, while office buildings and industrial facilities are holding their own.

"Both the multifamily and shopping center sectors retain green scores of 77 and 74, respectively, and in each of these sectors more than one-half of the markets are green," said Sally Gordon, Moody's analyst and author of the report.

Markets are scored on a scale of 0 to 100, with 100 being the strongest, and described in traffic light colors, with scores of 0-33 identified as red, 33-66 as yellow and 67-100 green. The current score, based on data through the third quarter 2003, is intended to be forward looking over roughly the next one-year horizon.

In this report, Moody's introduces two changes that further refine the data presented on the assets underlying commercial mortgage-backed securities. The office market analysis has been expanded to generate separate scores for both central business district (CBD) and suburban markets.

The hotel market scores have been extended to cover more markets and are divided into two sections to assess both the full-service (48 markets) and limited-service (39 markets) segments.

According to the report, the multifamily composite score remained green at 77 in the third quarter, improving from last quarter's score of 71. This is the only property type with no red markets.

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