Fundamentals Worsen as CRE Industry Eyes Bailout Funds

Up until September the commercial real estate industry had had just enough breathing room to keep from going into free fall. A credit squeeze had shelved or delayed many projects – but fundamentals were still strong, and the economy’s recession shallow.

That all changed with Lehman Bros.’ bankruptcy, of course. Now, the real estate industry is facing both a long-standing credit squeeze – which is likely to get even worse – as well as an economy that will no longer support the underlying fundamentals of many cities’ office, multifamily and retail real estate investments.

To be sure, associations that represent the real estate industry are lobbying Congress for assistance. The Real Estate Roundtable, the National Assoc. of Realtors and the Commercial Mortgage Securities Assoc., among others, are promoting a plan for the government to use some of the bailout funds to buttress credit and lending in real estate. While the details of these plans differ – and in some cases still remain behind-the-scenes – they are all largely based on the premise of a $200 billion credit facility that would support healthy, new issue CRE loans.