The Mortgage Bankers Association released its Commercial Real Estate/Multifamily Finance Quarterly Data Book for the third quarter of 2008, which reveals that commercial/multifamily real estate began to be affected by the slowing economy during the third quarter. Property fundamentals showed a slowdown in leasing activity.

Property sales and mortgage originations showed the impact of economic uncertainty, shifting investor expectations and the continued capital markets malaise, while mortgage investment levels were depressed by the capital constraints of traditional investors and headline risks associated with holding mortgage-related assets.

Despite relatively modest new construction activity, the slowdown in job growth, retail sales and other aspects of the economy has led to lower demand for commercial space and to declines in net absorption of space. As a result, supply is outpacing demand. Nationally, asking rents fell in the third quarter for office and retail space. Rents were flat for industrial space and up slightly for apartments and vacancy rates increased for each of the major property types.

Commercial property sales have also stalled. On a dollar basis, commercial property sales through the first three quarters of 2008 were 67% lower than for the same period in 2007. While part of the large percentage fall off can be attributed to the extraordinary volumes seen in the first half of 2007, sales volume in the third quarter was the lowest since 2003's third quarter.

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