by Calculated Risk on 9/12/2007 12:03:00 PM

More on CRE.

From the NY Times: Shopping Centers Begin to Feel Ripples of Housing’s Ills (hat tip vader)

... shopping centers have been caught in the credit squeeze that has transformed the capital markets. Private buyers, who were once able to finance 95 percent or more of the cost of a transaction, are being driven out of the market because such high leverage is no longer available.

According to investors, brokers and analysts, deals are taking longer to complete, and prices — at least for the second- and third-tier properties — are declining by as much as 10 percent.
...
While demand for space remains strong at the high-end regional malls, the average vacancy rate at strip malls, which are generally anchored by supermarkets, has been creeping up for more than two years, even though relatively little new space has been developed, according to Sam Chandan, the chief economist for Reis, a New York research company.

Mr. Chandan said the vacancy rate stood at 7.3 percent at the end of June and was expected to rise to 7.6 percent by the end of the year, its highest level since 1995.

In the second half of the year, he said, about 26.2 million square feet in strip malls will be completed, which would contribute to an oversupply. “That’s the highest level of completions we’ve seen in many years, and it coincides with the slowdown in the underlying drive for space,” he said.

Rising vacancy rates, falling prices, increasing supply and tighter credit: a prescription for a CRE slump.