BOMA testifies on credit crunch before Congress

Real Estate Weekly, August 6, 2008

The Building Owners and Managers Association (BOMA) International 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.

Speaking before chair Eleanor Holmes Norton and members of the subcommittee, BOMA International chair Richard D. Purtell, RPA, portfolio manager, Grubb & Ellis Management Services, Inc., Cincinnati, Ohio, testified that 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.

He said, "It is becoming increasingly difficult to acquire capital for new projects and renovations, for public buildings as well as those intended for private use [as] lenders are making it more and more expensive for even the most economically-sound companies to borrow money."

Purtell explained how building owners wishing to refinance, sell existing buildings or plan for future renovations are being negatively affected.

He said tenant retention is becoming a concern as future tenant improvement packages are becoming more limited and tenants are struggling to survive.

Purtell described how a lack of access to capital is affecting public buildings in cities such as 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, ineluding the negative impact on build-tosuit 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.

Visit www.boma.org to read the full testimony.