Distressed Commercial Properties Level Off

Are better days ahead for commercial real estate? A new report by Real Capital Analytics shows the number of distressed commercial properties is plateauing and expected to continue to do so in the new year. Distressed properties — which include commercial properties that are in default, foreclosure, or repossessed by lenders — had totaled $171.6 billion in October 2011, a decrease from topping off at $191.5 billion in March 2010, according to Real Capital Analytics.

“The real test of the distress plateau is likely to be seen in 2012 and 2013, when about $300 billion in loans comes due each year,” according to a recent article in the Washington Post.

At $41.9 billion, the office sector continues to have the largest number of distressed commercial properties. But that number has been steadily declining — about 11.8 percent less than its peak reached in October 2010.

The apartment sector has the second-highest level of distressed commercial properties with $35.6 billion in troubled loans, according to the Washington Post article. Land and other property types have about $29.8 billion in distressed assets.

The metro areas with the largest number of commercial properties in distress is Manhattan, in which the total volume of distress properties stands at $11.8 billion, followed by L.A.-Orange County with $10 billion. Meanwhile, Houston has the lowest at $111 per capita.

Source: “Amount of Distressed Real Estate Could be on Way Down,” Washington Post (Dec. 26, 2011)