Great series of posts.

Check out what was just Posted on Calculated Risk's Blog (see link and excerpt below)

http://www.calculatedriskblog.com/2009/10/fed-wor...

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WSJ: Fed Frets About Commercial Real Estate

http://online.wsj.com/article/SB12548762949556959...

.... "Banks will be slow to recognize the severity of the loss -- just as they were in residential," according to the Fed presentation, which was reviewed by The Wall Street Journal.

A Fed official confirmed the authenticity of the document, prepared by an Atlanta Fed real-estate expert who is part of the central bank's Rapid Response program to spread information about emerging problem areas to federal and state banking examiners throughout the U.S.

While the Sept. 29 presentation by K.C. Conway doesn't represent the central bank's formal opinion, worries about the banking industry's commercial real-estate exposure have been building inside the Fed for months. ...

Mr. Conway's presentation painted a bleak picture of the sliding real-estate values and enormous debt that will need to be refinanced in the next few years. Vacancy rates in the apartment, retail and warehouse sectors already have exceeded those seen during the real-estate collapse of the early 1990s, Mr. Conway noted. His report also predicted that commercial real-estate losses would reach roughly 45% next year. Valuing real estate has always been tricky for banks, and the problem is particularly acute now because sales activity is practically nonexistent.
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More than half of the $3.4 trillion in outstanding commercial real-estate debt is held by banks.
There is much more in the article, including a discussion on interest reserves masking bad loans (something we've been discussing for a few years) and "extend and pretend". Hy, hoocoodanode.

Note: REIS reported today that the apartment vacancy rate in cities hit a 23 year high: From Reuters: US apartment vacancy rate hits 23-year high-report ( http://www.reuters.com/article/marketsNews/idUSN0... and other CRE categories are also seeing rapidly rising vacancies and falling rents.
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Questions:
1. Oregon's UE rate was last pegged at 12.2% about a month ago ... is the lower figure cited here a more recent figure?
2. Within the last week, the national UE rose again ... and is expected to keep rising... can you divine Todd's source of optimism?
3. There has been much written in the past 48 to 72 hours about the state of the consume and their lack of a role in this recession's comeback... how can CRE rebound with the consumer relegated to the sidelines?

Thanks in advance!

PDX Broker ... you're a commercial broker. Can you opine what is being described as the next bubble. I have to admit, I'm a bit over my skis on this topic. See here for more info:

http://www.portlandwaterfront.com/discourse/2009/...

Same with my wife. I bought her (albeit now a humble) engagement/wedding rings there. She'd constantly drop by for the same reasons. We lived downtown for a number of years when we were first married back in the 80's (Portland Plaza). We loved it there. Walk every where, feel safe. It was clean, friendly, and devoid of all the crap you find there now. I love the vision that the City has crafted... but the execution is an entirely different matter.

MissDowntown ... you've made my case is spades! For the retailers, it's about a business friendly environment. For shoppers, it's about the experience.

Waterfront, baby, waterfront.

Hi Jeff,

Maybe the Zell Bros example needs a bit more context. Marty Zell and family have been one of Portland's preeminent retailers for decades.

On April of this year, KGW described Zell Bros this way: "In every city there are brand names that define the city's retail core. In Portland, Zell Brothers is one of them."

Unless I'm mistaken, retailers like ZB are supposed to be a bellwether - not only for the macro economy, but especially so for the localities in which they reside. Servicing HNW and affluent customers are an indirect, yet reliable measure of how well a given municipality is dealing with an economic downturn.

Yes, there is an undeniable element of the vertical industry, retail in general and certainly the economy as a whole ... but to loose sight of the fact that one of the city's retail pillars is foundering when there's still plenty of its citizens who can afford to shop there would be to miss a BIG data point.

Sorry ... it even made The O:

http://blog.oregonlive.com/frontporch/2009/09/top...

Zell Bros? Are you kidding me? In your wildest dreams, could you ever envision Marty Zell EVER resorting to this tacit to drive sales? What planet is this ;-)

This is a wonderful article, thank you for publishing it.

My two cents: Portland seems to always approach things with a task force or committee that largely is ineffectual because they do not have the authority to address and correct the root causes of systemic failure.

Case in point: the Mayor's own Downtown Vision Task Force and its Portland Retail Strategy for 2009. Where you point to the achievement of milestones, the results of the strategy are a miserable failure. When Zell Bros has to resort to a "Man on the street with a 40% off sign" then --- Portland, we have a problem.

Let me go further and take on those accomplishments -- not as a personal attack -- but to bring another point of view into play. You wrote: "now that September of 2009 is halfway over and 2010 is on the horizon, we can see that many of the action items outlined in the Portland Retail Strategy for 2009 have come to fruition."

I disagree that those deliverables you cite are the same as a measurable business outcome (increased sales, profitability, improved vacancy rates, etc).

METRO has made and continues to make BILLIONS of dollars of bets with taxpayer money without producing the desired outcomes its promised us. And I believe, its due in part, to our governments inability to distinguish between a deliverable and a quantifiable result/benefit.

Should we continue to invest in Retailers in our core downtown area - yes, Yes and YES. However, should we also examine important policies that have an even a greater impact retailer's ability to thrive (tax, social, etc.)? AN EVEN BIGGER YES.

Remove the barriers to commerce and give the retailers a business-friendly / customer-friendly environment in which to do business and Portland will have a vibrant downtown retail core.

Dissecting the mayor's comments and underlying meaning:

FEWER LANES = NOT BUILT FOR FUTURE CAPACITY AND WILL LIKELY STIFLE FUTURE ECONOMIC DEVELOPMENT

LIGHT RAIL = $1.7 BILLION IN TAXPAYER DOLLARS SPENT ON A SYSTEM THAT IS UNDERUTILIZED AND WILL NEVER PAY FOR ITSELF AND MORE COST EFFECTIVE ALTERNATIVES EXIST

NO TOLLS = WHY NOT IF YOU WANT TO USE AN EXPRESS LANE, PAY FOR IT. ITS A SELF-SELECTING REVENUE SOURCE FOR THE REGION'S ECONOMY

The Greater Portland Metro/SW Washington area continues to suffer under the leadership that simply will not admit its own failings. UGB, Light Rail, Ariel Tram, Street Cars and other benign sounding concepts have utterly failed to deliver the economic value that we taxpayers were promised.

Don't misunderstand me: I love the notion of sleek trains, modern trams and gleaming high rises on the waterfront. But these ultra-expensive projects were suppose to insulate the region from severe recessions. They were suppose to attract new businesses and private investments in the region. Instead we're tied for forth in the nation for the highest unemployment rate and a reputation for being anti-business. It's time to return to fiscal sanity and abandon this failed "build-it-and-they-will-come" mentality.

But my concerns run even deeper. Our elected officials are not just taking multi-billion dollar gambles with our money, they've also become dangerously arrogant. Look no further than the Sellwood Bridge Project and you will see these same leaders choosing to exercise their power of eminent domain to condemn homes along the Willamette simply to appease special interest groups. They blatantly ignore viable options that would serve all interests well. They hide behind hollow terms like Community Task Force, but do not invite affected homeowners to join. The hide behind catchy phrases such as Locally Preferred Alternative, when they know those homeowners who would prefer NOT to have their lives destroyed needlessly.

Portland: It's Time for a Change. Read more of my thoughts on PortlandWaterfront.com/Discourse