If the country’s terrorism insurance program were allowed to expire, coverage would become largely unavailable and the gears of commercial real estate would grind to a halt, warns the NATIONAL ASSOCIATION OF REALTORS® and the Coalition to Insure Against Terrorism.

“The potential unavailability of terrorism risk insurance at the end of this year impacts our financing agreements and potentially hurts the commercial real estate market,” said Joseph Ditchman, former president of the Ohio Association of REALTORS® and a partner at Colliers Ostendorf-Morris, one of Cleveland’s largest commercial real estate firms.

Ditchman testified at a U.S. House Subcommittee hearing on behalf of NAR and the Coalition to Insure Against Terrorism, which represents a wide range of businesses and organizations in the transportation, real estate, manufacturing, construction, entertainment and retail sectors. Read more

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The commercial real estate business can expect another two years of good times, but starting in 2009, the segment could weaken, predicts real estate mogul Sam Zell, speaking at the New York University 12th Annual REIT Symposium.

Zell is the chairman of Equity Residential, a real estate investment trust (REIT) that owns apartments. He also heads a number of real estate and other ventures domestically and abroad. He is working to purchase media company the Tribune Co., a deal he declined to discuss.

Earlier this year, Zell sold Equity Office Properties Trust to Blackstone Group for $23 billion plus the assumption of debt in the biggest REIT deal ever. Read more

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Analysts note that some parts of the real estate industry still hold substantial investment potential. Commercial real estate, especially, remains strong.

According to CB Richard Ellis Group Inc., commercial-building occupancy continues to grow nationwide, with rents up nearly 4.25 percent in the last 12 months. Looking at individual markets, in March, midtown Manhattan posted the highest office rents ever — $69.99 per square foot, on average.

Most investment advisers concur that individual portfolios should have no more than 20 percent invested in real estate that is not a primary residence. Read more

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Office rents in Manhattan surged to an all-time high in the first three months of the year as job growth pushed the vacancy rate below 6% for the first time in six years. Overall asking rents rose an average 24% from a year earlier to $53.43 a square foot, real estate giant Cushman & Wakefield said yesterday. The previous record was $50.92 a square foot in the fourth quarter of 2000. Rents for Class A office buildings - those considered by brokers and landlords to be the best office in the most desirable locations - gained 29% to a record $64.54 a square foot. “Ive never seen anything quite this dramatic,” said Joseph Harbert, Cushman’s chief operation officer for the metro region. Read more

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Commercial real estate vacancies are rising modestly, following a record year for investment activity, according to the latest data from the NATIONAL ASSOCIATION OF REALTORS®.

“Job growth has been fueling the demand for space, notably in the office sector,” says David Lereah, NAR’s chief economist. “Even so, some tenants are not ‘back filling’ vacated space as they move to higher quality new space, contributing to a modest gain in vacancy rates.”

Office, hotel, and industrial properties continue to be the most sought after commercial sectors for investment, he says. Investors channeled a record $306.8 billion to commercial real estate in 2006, up from $276.0 billion in 2005; that total does not include the hospitality sector or transactions valued at less than $5 million.

An additional $35.3 billion was invested in the hotel sector; however, long-term historic comparisons are not available for this segment of the market. Read more

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The NATIONAL ASSOCIATION OF REALTORS®, along with the Institute of Real Estate Management, encouraged the Senate to ensure a long-term solution that will guarantee the availability of terrorism insurance, regardless of the expiration of the Terrorism Risk Insurance Act of 2002.

In testimony submitted to the committee, NAR and IREM said, “The pricing and availability of coverage is an important component to both commercial real estate transactions and the ongoing management of the property. The inability to obtain terrorism insurance may either limit the financing options of a particular transaction or may jeopardize the transaction entirely.”

The testimony notes the passage of TRIA helped stabilize the commercial real estate markets following the Sept. 11, 2001, terrorist attacks by making terrorism insurance coverage available and, over time, more affordable. Read more

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After seven consecutive quarters of growth, brokerage activity in the commercial real estate market appears to have reached a plateau, according to data from the NATIONAL ASSOCIATION OF REALTORS®.

“Our commercial leading indicator is at a record high, but it is now leveling out,” says David Lereah, NAR’s chief economist. “The rate of expansion has been fairly tame over the last three quarters, which means that growth in commercial real estate sectors is likely to be modest.” Read more

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Worldwide investment in commercial real estate rose by 33 percent last year to a record $645 billion, according to Cushman & Wakefield Inc., a real estate adviser and research company.

About $256 billion, or almost 40 percent of all commercial real estate deals last year, were transactions in North America. That compares with $295 billion, or almost 46 percent, in Europe; and $94 billion, or almost 15 percent, in Asia. Read more

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In a letter to the Federal Deposit Insurance Corporation, Pat Vredevoogd Combs, president of the NATIONAL ASSOCIATION OF REALTORS® thanked the agency for extending a moratorium on Industrial Loan Company (ILC) applications.

ILCs are state-chartered banks that receive federal deposit insurance through the FDIC and are a vehicle through which commercial businesses are able to own banking operations. The FDIC board on Wednesday extended by 12 months the moratorium on commercial entities’ ability to acquire or start an ILC — an action that NAR strongly recommended. Read more

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