Could Commercial Real Estate drop 15%?

In today's Bloomberg report, commercial real estate is looking at slowing sales and price adjustments, since July sales were the lowest in almost a year:

Prices of U.S. commercial real estate could fall up to 15% in what would be the worst decline since the 2001 recession, Bloomberg reported Wednesday. "People aren't willing to do deals right now," said Howard Michaels, chairman of Carlton Advisory Services. "The expectation is that prices will come down." In July, investors bought the fewest commercial properties in almost a year and apartment building purchases were down 50% from June. Last month, the Archstone-Smith Trust postponed its $13.5 billion sale to a group led by Tishman Speyer Properties until October. Mission West, which owns commercial properties in Silicon Valley, said two weeks ago that its $1.8 billion sale might collapse because a bank has withdrawn funding. "There are so many deals falling apart," said David Lichtenstein, CEO of commercial property owner Lightstone Group. "People who can get out are getting out." Morgan Stanley industry analyst Matthew Ostrower forecast that average prices for commercial properties could fall 5-15% in the next two years. The cost of commercial mortgages, which have risen in tandem with rising defaults in the subprime sector, has stopped a record-breaking rally in commercial real estate. "No one's going to want to sell in this environment, because you're not going to get your price," said James Corl, CIO for real estate securities at Cohen & Steers Inc.