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CHICAGO-The majority of commercial real estate professionals have a bearish outlook on the commercial real estate industry and more than half have had transactions affected since the “credit crunch,” according to a study by DLA Piper that is being released today. The company, based here, conducts an annual “State of the Market” survey but conducted an additional survey this year to find out if, and how, the subprime mortgage crisis has affected real estate professionals. The survey was conducted by emailing questions to 2,500 top executives within the real estate industry.

Of the 332 executives that responded, 68% said that their outlook for the commercial real estate industry is bearish, according to DLA. The response is drastically different that the 78% of 274 respondents who considered the outlook bullish in May, says Jay Epstien, co-chairman of the Global Real Estate Practice at the law firm. Epstien had been surprised by the confidence the executives had back in May and the real estate fundamentals have not really changed since that time, he tells GlobeSt.com.

The subprime changes had caused people to stop and think and “the velocity of transactions has closed,” he says. There has also been a sharp decrease in the amount of respondents that expect the public-to-private merger and acquisition trend to continue. In April, 90% of respondents expected the trend to continue compared to 62% in the recent survey. The survey was sent out days after the Sept. 18 decision by the Federal government to cut increase rates by half a point. Nearly 63% of respondents felt that there should not be any further aggressive action taken to stabilize the credit markets. The majority of respondents, 61%, believed it will take between nine months and a year for the real estate markets to stabilize, he says.

About 63% of respondents have had transactions delayed or cancelled because of the credit crunch, Epstien says. Nearly 49% have had lenders modified the terms of loans, for committed deals, prior to the loan closing. Of those that had terms changed, more than 85% had interest rate spreads increased, which were usually from 25 to 100 basis points, and more than 78% had the loan amount reduced. Commercial real estate professionals have also seen tighter loan underwriting standards, increased spreads and increased equity requirements, Epstien says. More than 26% have seen an increase in loan defaults, with condominium conversions, mezzanine financing and land-banking being the top three types of projects defaulting on loans.