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Another US shock lurking in commercial property

Peter Ryan ABC News
A leading analyst says a plunge in commercial property values could cause another shock in the US financial system (www.sxc.hu: Robert Linder, file photo)

A leading analyst says a plunge in commercial property values could cause another shock in the US financial system (www.sxc.hu: Robert Linder, file photo)


As the United States starts to recover from the worst housing slump since the Great Depression, a plunge in commercial property values is shaping up as the next shock for its battered economy.



There are now predictions that some office and industrial properties in America could lose as much as half their current value by the time there is a turnaround.

The commercial downturn has just contributed to the collapse of the US bank Colonial Bancorp which has a $25 billion exposure to declining property values.

The chief global economist at the US commercial property giant CBRE, Ray Torto, says much of the commercial property decline has already occurred.

"We've seen already depending on which indices you want to look at, decreases of somewhere around 30 per cent in value, with other indices showing decreases as much as 48 per cent in value," he said.

"So we are talking about markets adjusting in the neighbourhood of 40 to 50 per cent by the time this is over."

Mr Torto says the worst of the commercial property crisis is yet to hit.


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