The level of distress in the global real estate market has risen to more than $153 billion, an increase of 56 percent since the end of 2008.
Research from property data firm, Real Capital Analytics, shows that the universe of distressed and troubled assets grew to $75 billion in the Americas by the end of the first quarter, and to $51 billion and $27 billion in Europe and Asia Pacific respectively. Roughly 85 percent of all the current distress is focused on five countries, including the US, Japan, Spain, the UK and Australia.
According to the New York-based company, by the first quarter of 2009 there were $106.2 billion of “troubled” real estate assets globally, with another $11.1 billion already foreclosed on by banks and lenders and $35.6 billion of property loans which had been restructured or had their debt maturities extended.
On top of this $152.9 billion of distress, RCA said there was a further $17.9 billion of formerly distressed situations that had been resolved, usually through a sale, refinancing, or other recapitalisation, taking the total distressed volume to $170.8 billion.
RCA deems “distressed” properties as assets as having been foreclosed on, in default or in foreclosure roceedings. “Potentially troubled” assets are where loans are set to mature next year, owners are in some financial distress, face tenant bankruptcies or where developments have stalled or underperformed.
However, distress is not just being seen at the property asset level. Roughly $67 billion of all distress, or around 44 percent, has been caused by “entity-level failures”. Already 40 major commercial property investment and development firms have failed, excluding homebuilders, casino/gaming companies and mortgage lenders, RCA said in its latest Global Capital Trends report.
Among the companies cited as being in distress are infrastructure specialist Babcock & Brown, retail company Centro Properties, aAIM Group, Orco Property and Pacific Holdings.