Several articles of interest as commercial real estate is now imploding.

Mall vacancies at 10 year high

Vacancies at U.S. malls and shopping centers approached 10-year highs in the fourth quarter, and are set to rise further as declining retail sales put more stores out of business, research firm Reis Inc. said.

Regional mall vacancies rose to 7.1 percent last quarter from 6.6 percent in the third quarter. It was the highest vacancy rate since Reis began tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies, according to New York-based Reis.

More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc. and Sharper Image Corp., filed for bankruptcy protection in 2008 as the credit squeeze and recession drained sales. Vacancies will rise further until the job market recovers, housing prices stabilize and lending resumes, restoring consumer confidence, said Reis.

Commercial property loans shows stress

The number of stressed commercial property loans increased at an accelerated pace in December, challenging a major segment of the U.S. bond market that has shown recent signs of stability.

The percentage of commercial mortgages placed with companies that specialize in servicing troubled loans jumped 0.32 percentage point to 1.61 percent, the highest in about four years, according to JPMorgan Chase & Co.

Erosion in fundamentals of commercial property has been long forecast as the slowing economy reduces demand for office space and cuts revenues from hotels and retail shops. Investors in 2008 fled commercial mortgage-backed securities (CMBS) as signs of recession led to increased aversion from risky assets, even as overall delinquencies fell far short of those in U.S. residential real estate.

My comment: Commercial real estate is now imploding as consumers do not go to the mall and spend as the new area of austerity and savings kick in. The commerical loan losses will segue into late 2009 and early 2010 where the loan loss torch will be passed to Alt-A foreclosures which appear to be even bigger then Sub prime.

John Polomny
The Real Deal