More Bad News for Commercial Real Estate

From Calculated Risk: Restaurant Performance Index at Record Low
The outlook for the restaurant industry worsened in November, as the National Restaurant Association’s comprehensive index of restaurant activity fell to a record-low level, stood at 96.7 in November, down 0.4 percent from October and its 13th consecutive month below 100.

A solid majority of restaurant operators reported negative same-store sales and traffic levels in November, while nearly one-half expect their sales in six months to be lower than the same period in the previous year.

From Calculated Risk: The Hotel Bust
Fortunes of the once-highflying hotel industry fell hard at the end of 2008 and the prospects for 2009 look grim as anxious Americans cut travel spending and leave plenty of room at the inn.

Hotel operators have seen room reservations fall drastically as business travelers and vacationers cut down on trips. In 2009, U.S. hotels will suffer one of the greatest annual declines in occupancy and revenue in history.

The report predicts a nearly 8% drop this year in revenue per available room, a key industry measurement of performance typically calculated by multiplying a hotel's average daily room rate by its occupancy rate. That would be the fifth-largest drop in revenue per available room since 1930. The largest recent drop was in 2001, when the measurement slipped 10.3%..

From Calculated Risk: Mall Vacancies Reach 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. 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 tracking regional malls in 2000, as well as the largest quarter-to-quarter jump in vacancies.

At neighborhood and community shopping centers, the vacancy rate rose to 8.9 percent from 8.4 percent in the third quarter, the highest since began publishing quarterly data in 1999. Strip mall vacancy rates are headed for double digits this year.

From Calculated Risk: CRE Crash Spreading
Regional banks may be an even bigger concern. In the last decade, they barreled their way into commercial real estate lending after being elbowed out of the credit card and consumer mortgage business by national players. The proportion of their lending that is in commercial real estate has nearly doubled in the last six years, according to government data. Most regional banks avoided the residential real estate market (because they couldn't compete) and instead focused on CRE lending. Now with CRE imploding, the number of bank failures will probably rise rapidly in 2009.