Prudential has put out a quarterly update on the state of the US commercial real estate market.
Square Feet Blog identified a few of the key comments from the report.
On commercial banks:
Commercial banks, which represent about half of the $3.5 trillion commercial-mortgage market, remain largely stuck in the “extend-and-pretend” mode. Some banks are originating loans for balance sheets, but the capacity and appetite for such deals is limited. Many banks are working through issues emanating from distressed loans that they wrote or inherited through mergers and thus most of their mortgage business encompasses extending existing loans.
And here’s the ominous commentary on life insurers, always a big part of this market
Troublesome for the market is that the increased activity of life companies and the emergence of specialty firms falls far short of filling the void left by the decimated CMBS market. At their peak life insurers wrote slightly more than $40 billion of commercial mortgages annually, compared to peak CMBS issuance of $230 billion in 2007. According to the American Council of Life Insurers, in the second quarter life companies made $4.6 billion of mortgage commitments, up 77% from 1Q09; a vast improvement but a drop in the bucket relative to the amount needed to replace the roughly $400 billion of debt that is scheduled to mature in 2010.