BOMA Testifies on Credit Crunch Ramifications

Aug. 25, 2008
The Washington, D.C.-based Building Owners and Managers Association (BOMA) Intl. testified before a U.S. House of Representatives hearing of the Committee on Transportation and Infrastructure's Subcommittee on Economic Development, Public Buildings, and Emergency Management on the effects of the credit crunch on federal leasing and construction.

Due to the rise in delinquencies and defaults on subprime mortgages in the residential sector over the past couple years, the uncertainty of financing is negatively impacting the commercial real estate market, making it difficult to acquire capital for new projects and renovations in both the public and private sector. According to Richard D. Purtell, BOMA Intl. chair and portfolio manager at Cincinnati-based Grubb & Ellis Management Co., "Lenders are making it more and more expensive for even the most economically sound companies to borrow money."

During the hearing, Purtell explained how building owners wishing to refinance, sell existing buildings, or plan for future renovations are being negatively affected, as well as how tenant retention is becoming a concern as future tenant improvement packages are becoming more limited and tenants are struggling to survive.

Purtell also described how a lack of access to capital is affecting public buildings in cities like San Diego, where buildings are being advertised at "bargain-basement prices," and in Philadelphia, where planned renovations are being stripped from 2009 budgets.

Purtell briefed subcommittee members on a number of other concerns, including the negative impact on build-to-suit leases, which have been significantly reduced due to the inability to secure capital and skyrocketing construction costs, and the ability of building owners to attract and retain tenants, and to stabilize rent and occupancy rates.

The full testimony can be read at www.boma.org  

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