Moody’s says U.S. commercial real estate markets’ decline accelerates

“The downward spiral in commercial real estate market fundamentals has accelerated as the recession persists, Moody’s Investors Service says in its latest Red-Yellow-Green study. For the first time in six years, none of the seven property types tracked by Moody’s has a “green” or strong score, while four of the property types are at levels of weakness unmatched in the almost 10-year history of the study. The two hotel sectors–full service and limited service–continued to post lowest possible scores of 0 during the first quarter, while the industrial sector recorded its all-time worst score as it fell into red territory. Multifamily deteriorated enough to fall from green into yellow, where it joins the retail and the central business district office sectors. Moody’s says that while supply pipelines do continue to dry up across all property types, forecasted demand has similarly dropped, so that demand projections for six of the seven property types worsened during the quarter. In addition, vacancy rates have maintained a steadily increasing trend among all property types (except hotels where they are not measured), and the poor absorption expectations do little to assuage the tide of availability. Given the bleak forecasts, any significant improvement in Red-Yellow-Green scores is unlikely in the coming quarters. Among hotels, year-over-year RevPAR fell below the record lows reached the previous quarter and now lag the baseline measure by levels never seen before. Moody’s Red-Yellow-Green report scores markets on a scale of 0 (weak) to 100 (strong) and describes them in traffic light colors, with scores of 0-33 identified as red, 34-66 as yellow, and 67 — 100 as green. The new second quarter study reflects data from the first quarter of 2009.”