BRE's Development Slowdown

Tags: bre
14 Jan 3:45am
Posted by ZacksResearch
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BRE Properties (BRE), a large West Coast apartment REIT [real estate investment trust] recently announced a dramatic slowdown in new construction spending going forward. The company will stop pre-development activities at three sites on the West Coast and will take a $0.10 per share charge in the 4th quarter.

BRE will also lay off 33 development related employees. This follows many other apartment, office and retail REITs that have severely curtailed projected 2009 development starts. Some companies have ceased all new construction projects due to the current economic environment.

Overall, multifamily construction is down about 8% (2008 through November) vs. the same period in 2007. Non-residential construction spending was up 16% in 2008 vs. 2006. We expect residential and non-residential 2009 spending to be well down from 2008 levels by at least 15%. Troubles obtaining financing and a generally weak economic outlook have caused many public and private companies to cancel or postpone large projects.

There is some good news for commercial property owners, which will be evident a few years out: there will be less new product coming on line, which decreases competition.

Read the full analyst report on BRE




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