N.O.I. For U.S. Commercial Properties Shows Emergence From Recession

September 26, 2011

NEW YORK CITY — Fitch Ratings released a report analyzing net operating income (NOI) for United States commercial properties, showing minor improvements since year-end 2008. That being the case, commercial property performance will slowly stabilize and report slight improvements for 2011.

Nonetheless, one year of positive NOI trend does not mean a full recovery, said Fitch Senior Director Adam Fox. “While the upswing is encouraging, net operating income is still outweighed by prior declines,” said Fox.

Commercial property net operating income (NOI) is still down by 1 percent overall from year-end 2009 to year-end 2010. However, NOI has shown an improvement from the prior year-of-year decline of 5 percent. Drilling down into specific property types, hotels have seen the largest performance declines over the last two years, with NOI dropping 29 percent between 2008 and 2010; however, that number is due to the daily reset of overnight rates, which make hotel properties the most vulnerable to performance declines. Conversely, multifamily properties have only declined 1 percent over the same 2-year period.

Below are results of Fitch’s analysis of year-over-year NOI changes by property type for year-end 2008 to year-end 2009, year-end 2009 to year-end 2010, and finally, the full term, year-end 2008 to year-end 2010.
Retail:
2008-2009 = -2%
2009-2010 = -1%
2008-2010 = -3%
Office:
2008-2009 = -2%
2009-2010 = -1%
2008-2010 = -4%
Multifamily:
2008-2009 = -2%
2009-2010 = +0%
2008-2010 = -1%

Read more…

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