Distressed commercial real estate in the United States stood at $181.1 billion in June, according to the analysts at ""Delta Associates"":http://www.deltaassociates.com. That tally includes properties in default, in foreclosure, and lender REO.[IMAGE]
The firm says the amount of distress in the commercial real estate (CRE) sector has increased by $500 million since April but still remains on the low end of the plateau range.
The level of distress began to plateau in spring 2010, according to Delta Associates, and has stayed between $175 billion and $190 billion since then.
""The volume of distressed property has held within a narrow range for more than a year, so we can ask ourselves if the worst may be over,"" said Delta Associates' CEO Gregory Leisch.
Leisch says this leveling off of distress occurred sooner than most experts predicted, largely because lenders have continued to extend debt obligations and commercial property values have stabilized, even rising in select markets to the point that some deals are no longer underwater.[COLUMN_BREAK]
The real test of the distress plateau will be seen in the next 12 months, according to Delta Associates, with about $300 billion in loans coming due and delinquency rates possibly edging up again.
""We think meaningful decline in distress will not occur until 2012 or so, and only then if interest rates cooperate,"" the firm said in its report.
The nation's volume of distressed CRE peaked at $191.5 billion in October 2010, according to data from ""Real Capital Analytics"":http://www.rcanalytics.com.
Delta Associates says the office sector still represents the largest share of distressed real estate at $43.4 billion in June.
Apartments represent $36 billion of CRE distress. Delta's analysts say this asset class seems to be on the mend with regard to operating fundamentals.
The distress factor in the hotel sector tallies $34.9 billion, it's $30.1 billion for the land/other category, about $26 billion for retail properties, and $11 billion in the industrial sector.
Manhattan still has the highest total volume of distress, followed by LA-Orange County, according to Delta Associate's report. LA-Orange County now has the highest volume of potentially distressed Ã¢â‚¬" or stressed Ã¢â‚¬" real estate at $4.2 billion.
Delta Associates is a ""TransWestern"":http://www.transwestern.net/ company. It has provided consulting, valuation, and data services to the commercial real estate industry for over 30 years.