The culprits, of course, are the frozen CMBS market and, moreimportantly, the financial crisis. Even though borrowers had beenlocked out of the debt markets for the better part of a year, Ratiusays, the industry had been performing relatively well – until thefinancial crisis hit. "That pushed us over the edge." In Q3 of 2008only $33 billion of investment sales closed, he notes. In the sameperiod last year, that figure was $110 billion. Deals that aregetting done are being financed with cash or some form ofequity.

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Ratiu believes next year will be worse, with foreclosures oncommercial buildings becoming more of an issue. Also, CMBSdelinquencies, which have remained relatively low, will probablyrise next year. "There are $400 billion of commercial loans comingdue in 2009 and in an environment of low liquidity that is going toput even more pressure out there."

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The report projects office vacancy rates to increase to 16.4% inQ3 of 2009 from 13.4% in Q3 of this year. Office markets with thelowest vacancies currently include New York, Honolulu and Seattle,all with vacancy rates of 9.6% or less. The highest vacancies arein Detroit, Phoenix and Dallas, with vacancies exceeding 20%.

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Vacancy rates in the industrial sector are forecast to rise to12.1% in Q3 of 2009 from 10.7% in Q3 of this year. Industrialmarkets with the tightest vacancies include Los Angeles, Salt LakeCity and Tucson, AZ, with vacancy rates of 6.8% or less. Areas withthe highest vacancies include Detroit; Stamford, CT; and Phoenix,with vacancies of at least 15%.

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The retail vacancy rate is expected to reach 12.7% in Q3 of2009, up from 9.8% in the third quarter of this year. Retailmarkets with the tightest vacancies include San Francisco; OrangeCounty, CA; and Honolulu, with vacancy rates of 4.5% or less.Markets with the highest vacancies include Detroit; Columbus, OH;and Fort Worth, Texas, with vacancies of 15.6% or higher.

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Multifamily vacancy rates are forecast at 5.8% in the thirdquarter of 2009, unchanged from the third quarter of this year.Markets with the tightest vacancies include San Diego, Northern NewJersey and Boston, with vacancy rates of 4.2% or less. Areas withthe highest vacancies include Jacksonville, FL; Phoenix; andOrlando, FL, with vacancies of 8.5% or higher.

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