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TEXT OF INTERVIEW
Steve Chiotakis: It’s not the kind of news you wanna hear if you’re in the commercial real-estate market. Vacancies are up. And that may bode well if you’re looking to lock-in a lease. But it’s also causing some concern. Marketplace’s John Dimsdale is with us live from Washington. Hi John.
John Dimsdale: Good morning Steve.
Chiotakis: So what are the latest stats on office rents?
Dimsdale: Well in the third quarter of this year the cost of leasing commercial space fell 8.5 percent from the previous year. The New York real-estate firm Reis reports this morning that’s the steepest one-year decline since the mid-90s. There’s a huge glut of empty offices. Companies let go of nearly 20 million square feet of space just in the third quarter. And it’s a sign of how bad the economy is hitting businesses. But it does help — at least in the time being — companies looking for space since the owners of commercial real-estate are ready to deal to try and stop this exodus.
Chiotakis: But John, what does this mean for the commercial real-estate industry?
Dimsdale: Well remember, this is an industry that’s already reeling from tight credit and the overbuilding of supplies. So falling income from rent is going to hurt. In fact, as the Wall Street Journal reports this morning, the Federal Reserve Board is preparing for a second shot to the real-estate system after the residential-housing bubble burst. This time it will be commercial office-space companies that will be defaulting on loans and falling into foreclosure.
Chiotakis: And what is the Fed worried about specifically?
Dimsdale: Well they have real-estate experts over there and they’re warning that many banks and investors are not protected from the losses they face when the loans they made to office-space developers and owners go bad.
Chiotakis: All right, Marketplace’s John Dimsdale in Washington. John, thanks.
Dimsdale: Thanks Steve.