At Steelhead, we're here to help investors make sense of market changes. Our new Investment Advisory Services assist investors with important disposition and aquisition decisions.

SOURCE: Bloomberg

In this article by author Mark Pittman on Sept. 27 we learn that the decline in the U.S. commercial paper market slowed last week, after the Federal Reserve cut mortgage interest rates to shore up confidence in the credit markets.

"The commercial paper market is not deteriorating as fast as it was in August, but as long as outstandings continue to fall, it is not out of the woods yet," Christopher Low, chief economist at FTN Financial in New York, wrote in a note to clients. "It's still more accurate to say the patient is less sick than to say the patient is recovering."

Asset-backed commercial paper has fallen $270.5 billion, or 23 percent since Aug. 8 to $912 billion after seasonal adjustments, according to the Fed.

Commercial paper is bought by money market funds and mutual funds that invest in short-term debt securities. In asset-backed commercial paper, the cash is used to buy mortgages, bonds, credit card and trade receivables, as well as car loans. Some of the programs are backed by subprime loans, issued to borrowers with poor credit or high debt.

The amount of commercial paper for all categories is now at its lowest since the week ended Aug. 30, 2006. Asset-backed commercial paper, at $912 billion, is at its lowest since May 31, 2006.

The Fed lowered its federal funds rate to 4.75 percent earlier this month as companies lost access to the credit markets.

The "tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally,'' the Fed said in its statement.

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SOURCE: Austin Business Journal

After several quarters of relatively low absorption, Austin's office property market is picking up steam.

Companies leased about 245,181 square feet of office space during the third quarter, up from just 35,835 square feet in the previous quarter, according to the latest report from Austin-based Oxford Commercial.

With roughly 2 million square feet of new, mostly Class A, product recently delivered or in the works, the new figures may allow developers to breathe a sigh of relief.

"There's been a lot of discussion on why our absorption has been so low despite the job creation figures and other factors," says Rick Whiteley, senior vice president with Oxford focusing on tenant representation. "I think the absorption numbers this quarter are going to be received very warmly" by developers.

The citywide occupancy rate among all classes of space stands at 86.2 percent, roughly the same as it was for third quarter 2006. But the market has added about 1.2 million square feet to the inventory roll in the last year, indicating a significant amount of vacant product has been absorbed.

Rents meanwhile have gone up considerably.

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It's interesting to note that both the price and demand index are still stronger than the past years, painting perhaps a brighter future for investors than other reports. We'll be interested to see the numbers for Q3 and Q4 of 2007 when they're available.

SOURCE: MIT Center for Real Estate

As presented here, the latest results of the Real Capital Analytics commercial property index are now available for the 2nd quarter of 2007.

The monthly national aggregate index continued to show a flat growth rate of 0.89% during June 2007. For the three months ending June, the national office properites index registered the highest rate of return at 3.86%, following by retail at 2.09% and industrial at 1.36%. The national apartment financing index, on the other hand, showed a return of (-) 0.08%.

This summary article offers downloads of transcation charts of apartment, office, industrial, and retail property investments for the second quarter of 2007.

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SOURCE: Wall Street Journal Online

Last week's interest rate cut by the Federal Reserve gave hope to many people who follow the residential real-estate market, but the commercial investment markets have shrugged it off.

Industry watchers say the new interest rate could boost consumer confidence, but so far it hasn't been enough to significantly ameliorate the credit crunch. One factor is that the 10-year Treasury yield, to which fixed-rate, commercial mortgages are closely tied, has risen in the past week, increasing borrowing costs. Thus, many commercial deals could remain stalled, experts say.

"The Fed is making a concerted effort to avoid an economic slowdown, and that will likely keep property-leasing demand healthy in the short term and continue to support the perception that real-estate values and assets are a good place to be," Wachovia analyst Christopher Haley said.

Many industry watchers believe it will be months before the market fully recovers. "Some deals have gone through, and pricing for senior bonds is firming up, but the market is still a little bit choppy in trying to work its way back to health," said Tad Philipp, a managing director for Moody's Investors Service.

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SOURCE: Market Watch

Just two days after the Fed lowered the federal funds interest rates by 50 basis points, Bernanke also said the central bank stands ready to foster price stability and sustainable economic growth.

"Recent developments in financial markets have increased the uncertainty surrounding the economic outlook," Bernanke said. "The [Federal Open Market] Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth," he said.

Bernanke said the recent surprise half-percentage point interest rate cut was designed to forestall potential effects of tighter credit conditions on the broader economy.

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At Steelhead, we're here to help investors make sense of market changes. Our new Investment Advisory Services assist investors with both disposition and aquisition decisions.

SOURCE: Bloomberg

According to today's updated article on Bloomberg, there are growing concerns and predictions for a price drop in the commercial real estate markets in the coming months and years.

The article mentions some alarming numbers by industry consultants at New York-based Real Capital Analytics Inc. who recently reported that "Investors in July bought the fewest commercial properties since August 2006 and apartment building loans were down 50 percent from June."

Commercial mortgage rates have climbed as defaults rose in the subprime part of the residential real estate market. About six months ago, a 30-year commercial loan with 5 to 10 years of interest-only payments would have cost the borrower about 120 basis points more than the yield of the 10-year Treasury note. A similar loan would now cost about 160 to 200 basis points more than the 10-year Treasury's yield of 4.6 percent, data compiled by New York-based Cushman & Wakefield Sonnenblick Goldman show.

The increase has halted a rally that lifted prices for office buildings, apartments and hotels to records this year. The average price paid for high-quality office properties in city centers reached $291 a square foot, up from $188 in 2005 and almost double the average $152 in 2001, Real Capital reported.

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