Thursday, March 26, 2009

The other shoe to drop: Commercial real estate values to tumble and put more pressure on banks

Billionaire and big Democratic Party donor George Soros says the value of commercial real estate in this nation will fall by 30 percent, putting new pressure on banks trying to get out from under their bad home lending.

As reported by Bloomberg News:

March 26 (Bloomberg) -- Billionaire investor George Soros said U.S. commercial real estate will probably drop at least 30 percent in value, causing further strains on banks.

“Commercial real estate has not yet fallen in value,” Soros, speaking at a forum in Washington, said. “It is inevitable, it is written, everybody knows it, there are already some transactions which reflect and anticipate it, so we know, they will drop at least 30 percent.”

U.S. commercial real estate values have fallen 30 percent from the 2007 peak as cheap financing disappeared and the recession reduced occupancies, RREFF, the real estate investment unit of Deutsche Bank AG, said yesterday in its 2009 forecast. Total returns in a commercial property index used by pension funds may decline as much as 11 percent this year, the group said.

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