Further declines in commercial real estate forcast by Moody's

Moody's said in a press release last week that commercial real estate will continue to decline in value before a long term stabilization occurs and the market begins to recover.  The income stream produced by commercial real estate which has been sold to investors as CMBS will not recover soon causing further declines in CMBS values.  Maturing CRE loans in these pools will not be able to be refinanced as maturities of bubble value loans approach.

The rating agency says that they will be downgrading CMBS tranches that were issued as late as 2008 - well into the bubble deflation.  They went on to say that the cash flows for properties with short-term lease structures, such as hotels and multifamily, will likely hit bottom in 2010 or early 2011. The bottom for office, retail and industrial properties will take longer to form.

Moody's says that property values have deflated 42.9% from their peak and thinks that the bottom will hit in up to two years from now at a 45-55% decline from the peak.

Source: http://v3.moodys.com/viewresearchdoc.aspx?docid=PR_190851