Nationally, the office sector represents the largest share of distressed commercial real estate at $41 billion. This is a decrease of $829 million, or 2 percent, since October 2011. Apartment properties continue to have the second-highest level of distress, with $35.2 billion of distress — a $0.3 billion, or 0.9 percent, drop since October. Unbuilt land and other properties constitute the third-highest level of distress with $29.5 billion in distressed assets, a decline of $300 million. Retail has the fourth-most distressed assets at $27.9 billion, down from $28.6 billion in October. Hotels have the fifth-highest level of distressed assets currently, falling $3.1 billion since October, to $21.1 billion. Although industrial has by far the lowest volume of distressed real estate, it rose $435 million to $12 billion, an increase of 3.8 percent.
‘Stressed’ real estate
While the volume of distressed commercial real estate properties is significant, so is the looming volume of stressed property. These properties have characteristics of concern in the short term — maturing loans, bankrupt tenants, under-performance, financially troubled owners or other significant obstacles that could potentially lead to distress in the future.
The Los Angeles-Orange County area has the highest total volume of distress, followed closely by Manhattan. L.A.-Orange County also has the highest volume of potentially distressed (what we call “stressed”) real estate at $4.5 billion. Manhattan has the second highest level with $4 billion.
South Florida has $996 in distressed real estate value per capita, the largest amount per capita after Manhattan, which has $2,455. Houston has the lowest amount among the markets we track, at $147 per capita. Houston also had the largest increase since October 2011, growing from $111 to $147 per capita, or 32.4 percent. (credit, m.donnelly)