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Commercial real estate crisis continues in US with price falls of 33% in some locations

The Dallas area will suffer the sharpest office building value declines with prices falling 17% says the survey of investors by PricewaterhouseCoopers. Some properties may see declines of more than 33%. San Diego will see declines of 16%, Atlanta 13.5% and Houston 12.5%. .

Investors say they are more pessimistic about the Dallas office market because of cutbacks at large corporate employers in the area. They also cite contractions at major high-tech firms in North Texas due to increased international competition as well as global downsizing.

PricewaterhouseCoopers found that investors expect the US commercial real estate market to continue to decline over the next year as business demand for real estate slumps and rental rates soften.

Investors said they expect an overall 10% further drop in commercial property values during the coming 12 months with the biggest price declines in the office and regional shopping mall markets.

'The sales market is simply stalled and remains in a state of flux because neither buyers nor sellers know exactly where pricing is right now. Investors are concerned that the industry is basing values on distressed sales, which will ultimately reset the market too low,' said Susan Smith, director, real estate advisory practice at PricewaterhouseCoopers.

'It is a very difficult cycle for investors to be in and one of the most challenging cycles for them to get out of,' she added.

The PricewaterhouseCoopers survey also shows that building rents have been affected in all but two of the 28 markets surveyed and most of the investors anticipate further office rental rates declines over the next year.

The forecast predicts a recovery to begin in the nationwide retail and office markets starting in 2011.