The biggest short- and long-term challenges facing commercial real estate going forward are the large amount of debt maturing between now and 2015, said an executive with Deloitte LLP.
The firm issued a report detailing what it considers to be the top five issues facing CRE this year. Bob O'Brien, vice chairman and real estate sector leader, said 2011 has been positive for CRE to this point, as the uncertainty affecting the economy has had less of an impact on the business.
There is a budding CRE recovery, but macroeconomic issues are threatening to hold it back. Investors should have strategies based on more realistic expectations of a modest and gradual return to growth.
Regional and local banks facing their own liquidity challenges hold many of the CRE loans scheduled to mature in the next few years. "Prospects for a broad commercial real estate market recovery stand to be enhanced when lenders resume loan originations for 'non-trophy' assets and refinancing options increase to stabilize debt maturities," Deloitte said.
It predicts lenders will gradually end their "amend and extend" policies and permanently resolve troubled mortgages. This will lead to an increase in distressed transactions and real estate owned.
Real estate investment trusts should "dominate burgeoning real estate transactions in 2011, albeit with increased competition from other investors," Deloitte predicted.
