Commercial rents, values expected to fall

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Commercial property values and asking rents are expected to continue their declines throughout this year.

A recent online survey of executives, conducted by Deloitte, showed that 76 percent expect commercial property values to decline, while 73 percent anticipate rents to fall.

Increased unemployment has caused less demand for office space, reduced rents and an overall decline in commercial property values.

“Right now, commercial real estate executives are weighing their options, determining if the time is right to invest while prices remain depressed and before interest rates begin to rise, ”said E.J. Huntley, principal at Deloitte Financial Advisory Services LLP.

Three-quarters of executives expect interest rates to rise during 2010, and 48 percent expect rates to increase by 50 basis points or more.

Almost two-thirds predict that a full recovery of the market will require two to three years, while 29 percent believe a full recovery will take four years or longer. Only 8 percent anticipate a full recovery within the next year.

Many commercial real estate executives are contemplating opportunistic investments, and nearly half of those surveyed were either already investigating potential acquisitions, or expect to begin doing so within the next year.

Because the market’s lower prices make it more financially advantageous to buy rather than lease, half of real estate company executives and 39 percent of commercial property tenants said their companies are currently investigating potential acquisitions.

To see full survey results, visit Deloitte.com.