Blumberg Capital Partners, one of the nation's leading investment fund managers, today said that an analysis of commercial real estate values, leasing and vacancy trends by its staff shows that any federal bailout of the industry will require a painful, significant deleveraging to succeed.
The company said any bailout plan is working against a legacy of debt time bombs created by imprudent, unrealistic buyers who over-borrowed during the peak of the market in anticipation prices would continue rising unabated.
The Blumberg analysis shows that maturing debt obligations will come under even more stress in 2009 with leasing rates poised to drop an additional 20% to levels not seen since 2002, and with office vacancies potentially rising to 25% by the end of the year. Indeed, the nation's office market could take until 2011 to stabilize, the company's analysis shows.
"Creating a refinancing stimulus is helpful to thaw the credit freeze, but these ticking debt time bombs will make it difficult for our public officials to get their arms around this problem," said Philip Blumberg, Chairman and CEO, as well as firm's chief investment strategist. "Now, because the global economic recession has worsened over the past few weeks, coupled with layoffs at the front end of the cycle, demand for office space nationally is falling. Until companies can weather this storm and start expanding again, prices will remain low for landlords, and vacancies will rise."
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