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Commercial investors are expected to keep waiting for prices to fall

September 15, 2009 | 12:01 am

Investors looking to snap up commercial properties on the cheap as the economy hammers the commercial real estate industry have been disappointed all year, and they're pretty bummed about it.

Property values have declined on paper, but so far would-be buyers haven't been able to walk off with offices, shopping centers, hotels and warehouses at fire-sale prices. Very few properties are changing hands.

"Investors seem surprised at the lack of quality buying opportunities given the problems in the financial markets and the continued weakening of the industry's fundamentals," said Susan Smith, director of the real estate advisory practice at PricewaterhouseCoopers.

The accounting and advisory firm is expected to release a survey today that says investors are going to keep waiting because, they believe, many properties purchased during 2006 and 2007 are over-leveraged and lenders will eventually be forced to foreclose and sell them at a discount.

Investors surveyed said commercial real estate values will continue to deteriorate into 2010 in part because rents are still falling. Rents are expected to drop another 20% in Manhattan and San Francisco. Los Angeles and San Diego rents will dip another 10%, investors predicted.

-- Roger Vincent