CRE: Orange County Non-Residential Permits Value off 40%

Submitted by
CalculatedRisk on Wed, 05/28/2008 - 12:35pm (9 comments)
in
CalculatedRisk wrote on Wed, 5/28/2008 - 12:41 pm

Just a test of comments.

best to all

tj & the bear wrote on Wed, 5/28/2008 - 3:10 pm

Any breakout by CRE categories? Wondering if any particular area (office, retail, etc.) is leading the charge off the cliff.

tj & the bear wrote on Wed, 5/28/2008 - 3:14 pm

Sheesh, would've helped if I followed the link first:

Here are percentage changes by category:

* Industrial: -68.8%
* Office: -68%
* Stores: -79.1%
* Hotel-Motel: -86.7%
* Alterations and Additions: -10%
* Other Non-residential: -45.9%

Brutal across the board. The only savior was parking garages(!), +184%.

James Kahler wrote on Wed, 5/28/2008 - 3:20 pm

A decline in construction is not a bust, unless you are a builder or developer. Let's be careful with broad brush conclusions here. To be sure, fundamentals in certain CRE sectors have tailed off (I'm thinking of retail, chiefly). Overall, however CRE fundamentals are strong. And unless you were a late highly leveraged (and therefore, probably private) buyer, business is stable. REITs, as an example, are moderately levered compared to CRE owners of prior cycles. Although their equity prices are down and and credit spreads have widened, their businesses are intact. The change in cost of capital merely slows them down on the transaction side.

Spiv wrote on Wed, 5/28/2008 - 3:54 pm

Yea, I can see the "merely slows them down" in Chicago's Loop. Empty offices on the lower floors in nearly every building I can see from my corner suite.

If you want to know how things are, go into Starbucks, the folks in there will give you the skinny, things are slow.

tj & the bear wrote on Wed, 5/28/2008 - 4:10 pm

James,

Residential real estate looked bulletproof in early 2005, too. It's definitely a bust, it's just in the earliest stages. As CR has noted many times, CRE lags RE by 18+ months.

MiTurn wrote on Wed, 5/28/2008 - 5:22 pm

I'm curious if this downturn will translate into higher unemployment figures in California, or all commercial real estate construction workers there illegals (like residential construction workers)?

Just doesn't make sense.

gamma wrote on Wed, 5/28/2008 - 7:13 pm

Spiv-

I'm in Chicago too. There are so many places that are empty, yet residential real estate hasn't really slid that much on the near-North side Also employment in Chicago appears to be okay so far - but I'm guessing it's going to happen all at once here in the next 18 months. RRE, CRE, unemployment will happen all at once.

russell120 wrote on Thu, 5/29/2008 - 7:55 am

Subcontractors in the Carolinas are still very busy.

However, the public bids are starting crowded with General Contractors. A large Elementary School in Charlotte lists 9 general contractors (and that may not be the full list) bidding. But none of them are from out of area.

When you see out-of-area bidders on these types of jobs, then you know there will be problems. General Contractors do not generally have a working field force (just supervisors) so they are generally more geographically mobile then the subcontractors (who if they bid an out of area job have to find local help or pay per diem).

Orange County you would expect to be having problems. But a lot of areas still seem to be doing well. Based on AIA numbers, late summer or early fall will be the when the bids start drying up.

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