The U.S. economic slowdown and credit crunch are beginning to affect the commercial real estate market in the United States, according to a report from the Mortgage Bankers Association on Thursday.
"Despite relatively modest new construction activity, the slowdown in job growth, retail sales and other aspects of the economy has led to lower demand for commercial space and to declines in net absorption of space," read the MBA's Commercial Real Estate/Multifamily Finance Quarterly Data Book. "As a result, supply is outpacing demand."
As a consequence, commercial/multifamily mortgage debt outstanding declined 0.1% compared to the previous quarter as government-sponsored enterprises and Ginnie Mae broadened their holdings of multifamily mortgages by $14 billion.
Mortgage debt outstanding declined 0.1% in Q3.
"For more than a year, we have been faced with the question of whether commercial real estate would be the next shoe to drop," said Jamie Woodwell, vice-president of Commercial Real Estate Research for MBA. "The weakening economy, in concert with the ongoing credit crunch, is demonstrating that commercial/multifamily is not entirely immune to the impacts felt by the residential market."
The report comes just one day after U.S. mortgage rates moved higher, according a another report from the MBA, which said that the average interest rate for a 30-year fixed-rate mortgage moved up to 5.07% from 5.03%.
Nevertheless, 30-year mortgage rates are off highest level last year.
By Erik Kevin Franco and edited by Nancy Girgis
©CEP News Ltd. 2009