Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-Green shoots notwithstanding, don’t look for the economy to come back strong next year, says CapLease president William Pollert in a bimonthly report. “Given the depth of the recession and its origin in a meltdown in the financial markets, economic recovery is likely to start slow and remain tepid through 2010,” Pollert says. He adds, “although the economy appears to be bottoming out, no strong foundation is in place” for a V-shaped recovery.

The rate at which economic growth picks up steam in 2011 and beyond depends largely on the federal government’s success at managing $12.5 trillion worth of bailout and stimulus programs while keeping a lid on inflation, Pollert says. He calls this “a very challenging balancing act, even in the best of times.”

However, Pollert cites a number of other factors that are likely to put the brakes on recovery for some time. Among these is consumer spending, whether for durable goods or housing. Both have been hit hard by declines in home prices and individual net worth. Putting a further chill on any consumer exuberance is the specter of a 10% unemployment rate in the first or second quarter of 2010.

Industrial production, Pollert says, has been “hammered” by declines in private business inventories and decreases in business investment over the past few quarters. While this correction augurs well for a recovery in industrial production, it’s likely to be dampened by a continued lack of business spending and what Pollert calls “anemic exports” well into next year.

In the financial sector, Pollert notes, “banks are still reluctant to lend, and the credit markets are not functioning normally.” This reluctance is due in part to the prospect of further write-offs on credit card debt–as much as $125 billion by the end of next year–and losses on commercial real estate loans, which for small and mid-sized banks could reach $100 billion in the same time frame.

Pollert says the Fed’s recent expansion of TALF to include AAA-rated CMBS may be undermined by the Standard & Poor’s plan to change its methodology for rating CMBS. Standard & Poor’s has projected that 90% of 2007-vintage super-senior AAA CMBS would be downgraded under the new methodology, with 60% of 2006 and 25% of 2005 super-senior CMBS incurring the same re-rating.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join 1000+ of the industry's top owners, investors, developers, brokers & financiers at THE MULTIFAMILY EVENT OF THE YEAR!

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.