Commercial Property Sector Hurt by Housing’s Decline

Miami–Influenced by the housing market, the U.S. commercial real estate market will see increased losses and bank failures in the coming months, according to a leading bank regulator.Comptroller of the Currency John Dugan–of the Office of the Comptroller of the Currency (OCC), which charters, regulates and supervises all national banks and federal branches and agencies of foreign banks–said regulators have become increasingly concerned about the state of U.S. banks that have been damaged by the housing market, the Financial Times reported Friday.“We’re entering a stage of the commercial real estate credit cycle where problems have started to surface and losses have started to increase,’’ Dugan said Thursday during in a speech in Miami.As home purchases fell, commercial borrowers have had a more difficult time making loan repayments, the Times said. In addition, the possible U.S. economic decline could further complicate the commercial real estate industry.Dugan said he expects bank failures to increase because many local institutions had considerable exposure to the slumping housing market and, as a result, are at risk for loan delinquencies and defaults.International commercial real estate investment is predicted to drop 17 percent in 2008, according to the Times.Commercial property hit a new high of $930 billion in 2007, rising 26 percent from 2006, according to global property agent Cushman & Wakefield; but those days may be dwindling for the sector, which saw trading volumes decline by 12.5 percent in the second half of 2007 as global credit issues began to hamper deals.