Five of seven commercial property types tracked by Moody's Investors Service had lower scores in the fourth quarter than in the third quarter, showing some signs of softening in commercial real estate markets. The rating agency reported that the multifamily and shopping center sectors maintained or improved their scores in the fourth quarter. "Retail bears watching because forecasts in personal income, a primary driver of retail demand, are still strong but are shallower than they were a quarter ago," said Sally Gordon, a Moody's analyst and senior vice president. "The issues in the single-family sector, in turn, are a bit of a wild card for multifamily, both as to potential demand increase from owners facing foreclosure as well as potential supply increases from condo projects converted to rentals." Moody's also said the two largest markets backing commercial mortgage-backed securities, New York and Los Angeles, continue to have the strongest scores. Even so, "expectations of a weakening economy are starting to be reflected in the outlooks for several property sectors," according to Ms. Gordon. Office vacancy rates, currently at 9% for central business districts and 14% for suburban, are expected to rise in the face of softening demand. Moody's can be found online at http://www.moodys.com.

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