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Page 15
FOURTH QUARTER 2012
The CMBS delinquency rate stabilized in December 2012 at 9.7%; however, there is still a large volume of unresolved
CMBS loans in special servicing from borrowers who took out five-year loans at the top of the market, when
underwriting standards were less stringent. 6 Those borrowers now face maturities on properties that have seen
significant declines in value. CMBS loan maturities are expected to peak in 2014, which could add to distress in the
market. 7
Apart from the CMBS market, commercial banks, private real estate funds, insurance companies, and government
sponsored enterprises (GSEs) represent sources of capital for commercial real estate acquisitions, although core,
stabilized properties maintain easier access to financing.
Property Sectors
(billions)
U.S. U.S. CMBS CMBS Issuance
$250
$200
$150
$100
$50
$0
$168.7
$202.7
$230.2
$12.1
Apartment
As measured by rents and occupancies, fundamentals in the apartment sector remain the strongest among the major real
estate property types. Apartment vacancy rates fell to 4.5% at year-end, down from 4.6% at the end of the third quarter,
the lowest level in over a decade. 8 Average rents for apartments rose by 0.6% in the fourth quarter and 3.8% for the full
year, with the largest increases in San Francisco and Seattle, where rents increased by nearly 6%. 9 As apartment rents
have continued to rise, home buying has become more economical than renting in some areas, as measured by the rentto-mortgage
ratio.
Office
As of year-end 2012, the office vacancy rate stood at 17.1%, compared to 17.3% at year-end 2011. 10 Asking rents in the
office sector rose 0.8% during the fourth quarter and 1.8% for the year to an average of approximately $28.46/square
foot. 11 Demand for office space is closely tied to employment, and continued uncertainty about a sustained economic
recovery continued to weigh on the sector. Nevertheless, technology centers such as San Francisco saw rent growth of
6.6% in 2012. 12 The office absorption rate for the year was positive, at 17.2 million square feet, but well below the 2005
high of 66.7 million square feet. 13
$2.7
$12.0
$30.0
$48.2
2005 2006 2007 2008 2009 2010 2011 2012
Source: Fidelity Investments
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