Unemployment Rate Back to Single Digits

The U.S. Department of Labor surprised the nation on Friday by announcing that the official unemployment rate dropped to 9.7 percent in January. Commercial real estate isn't breaking out the noisemakers just yet, but maybe the bottom has arrived.

February 8, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user totalAldo

The U.S. Department of Labor surprised the nation on Friday by announcing that the official unemployment rate dropped to 9.7 percent in January. It was seen as something of a technical adjustment, however, since a separate survey by the government found that the economy lost a net of 20,000 jobs during the month.

Commercial real estate isn’t breaking out the noisemakers just yet, either. But maybe the bottom has arrived.

“We appear to be bumping along the bottom of the market right now,” Daniel F. Miranda, president of Chicago-based HSA Commercial Real Estate, told CPE. “We’ve stopped accelerating our way downhill, even though we’re still seeing loan losses among some commercial property lenders. It’s reasonable to expect some recovery in the second half of the year, in some property sectors more than in others.”

SBA to Help CRE?

The Small Business Administration, something of a neglected stepchild of the federal government for many years–its abolition was suggested more than once–is getting renewed attention these days, with President Obama’s proposal for a larger SBA budget. The main purpose of the increase would be to provide loan guarantees to encourage banks to boost lending to small businesses.

Tucked away in the president’s SBA proposals is a change in how the agency’s 504 loan guarantee program works, one that might help some real estate borrowers. The way things are now, the 504 loan guarantee program can currently help small businesses buy real estate, it can’t help them refinance it.

Under the new proposal, that restriction would be relaxed (for a year at least). If the change were made, SBA 504 loans could be used to refinance existing debt as long as the debtholder is current on its payments. But this wouldn’t be a panacea for CRE. The catch for the broader real estate industry: the real estate in question has to be owner-occupied.

CIT Group Gets New Boss

What next for CIT Group Inc.? A new CEO with a familiar face: John Thain, the chap who was shown the door from Merrill Lynch more than a year ago by Kenneth Lewis (who’s having his own problems these days). CIT recently emerged from Chapter 11 bankruptcy, the main effect of which was to flush away about $10 billion in bad debt, and Thain’s task will now be to take the company back to profitability after its mid-2000s foray into subprime lending blew up in its face.

Retailers and their landlords have an interest in the future health of CIT, since one of its major business is factoring, or purchasing accounts receivables from companies–including a lot of smaller and mid-sized retailers. Such sales are an important part of healthy cash flow for those companies, and the prospect of the complete collapse of CIT last year (which was barely averted) would have crippled many of those retailers.

Wall Street spent most of the day on Friday in a down mood, but managed a small uptick by the end of the day. The Dow Jones Industrial Average ended up 10.05 points, or 0.1 percent, while the S&P 500 gained 0.29 percent and the Nasdaq gained 0.74 percent.