Joseph Gyourko - Faculty Research in Knowledge@Wharton

On Shaky Ground: Commercial Real Estate Faces Financial Tremors

Wed, 22 Jul 2009 15:41:58 EST

As the global recession drags on, new concerns are rising about commercial real estate. Loans taken out during the boom years are coming due, but commercial property owners are contending with higher vacancy rates, lower rents and a less-than-receptive environment for refinancing their obligations. Industry analysts and politicians suggest that commercial real estate is about to become the next high-profile casualty in the ongoing economic meltdown. "The shoe has already dropped," says one Wharton real estate professor.

Will the Levee Break? An Ocean of Bad Debt Rises despite Fed Rescues

Wed, 17 Sep 2008 20:25:57 EST

The rescues, bankruptcies and dizzying write-downs for Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG and other giants of international finance signal a reckoning for Wall Street wizards who engineered the ongoing credit crisis with opaque securities based on risky subprime home loans and the assumption that housing prices would never decline, according to a panel of Wharton professors. The flood of bad debt, they add, won't subside anytime soon.

Collateralized Damage: Commercial Mortgage Securities Are at a Standstill

Wed, 23 Jul 2008 14:16:26 EST

Media outlets and regulators have scrutinized the securitization of risky residential mortgages for their role in the global credit crunch. Not as much attention has been paid to their less-risky cousin, the commercial mortgage-backed securities (CMBS) market, which has been tarnished by problems on the residential side. Despite their superior fundamentals, says one Wharton professor, the CMBS market is "pretty much gone." The question now: Can it come back?

Coming Soon ... Securitization with a New, Improved (and Perhaps Safer) Face

Wed, 02 Apr 2008 17:52:07 EST

Securitization is often blamed for aggravating -- if not causing -- the subprime mortgage crisis that keeps roiling U.S. real estate and credit markets. By repackaging pools of mortgages into securities that could be resold to investors, the argument goes, securitization permitted unscrupulous underwriters to offer housing loans to poor borrowers and transfer the risk to Wall Street. How, then, will the present credit crisis affect the future of securitization? According to professors from Wharton's finance and real estate departments, securitization will not disappear -- but it is in for radical changes.

Mortgage Crisis Bailout: Relief for Some, Risk for Others

Wed, 05 Mar 2008 19:03:39 EST

Does the mortgage crisis demand a government bailout? A year ago, most experts thought not. Sad as the situation was for some homeowners, many felt the problem would be confined to those who had gambled on risky loans with eyes open. But things have changed. The mortgage crisis is behind a nationwide drop in home values that is impeding all types of lending. More and more experts now say some sort of government response is necessary to avert a prolonged recession. But what kind of bailout is affordable, and fair?

Home Truths about the Housing Market

Wed, 05 Sep 2007 15:55:12 EST

The sub-prime mortgage crisis and the credit crunch that has followed in its aftermath are taking their toll on the housing market. On August 28, the S&P Case-Shiller U.S. National Home Price Index showed that home prices fell 3.2% in the second quarter. According to the National Association of Realtors, the inventory of unsold homes is at a record high. As sales have fallen, many home builders have seen their stock prices drop by more than 60% during the past year. How serious is this situation? Is there light at the end of the tunnel? Joseph Gyourko, director of Wharton's Samuel Zell and Robert Lurie Real Estate Center, and Todd Sinai, a professor of real estate, spoke to Knowledge@Wharton about these questions and more.

Subprime Meltdown: Who's to Blame and How Should We Fix It?

Wed, 21 Mar 2007 16:34:51 EST

Troubles in the subprime mortgage industry seem to be spreading. The stock market is in turmoil. Alan Greenspan and others say the economy is being hurt. Consumer groups predict that up to two million Americans will lose their homes. Should the government do something? A growing list of people say it should, from Democratic senators Christopher Dodd and Hillary Clinton to a string of advocates for the poor. But Wharton faculty, including those who have studied the mortgage market and past government bailouts, aren't convinced.

The Millionaire down the Street Was Right, But Now What's in Store for Real Estate?

Wed, 14 Jun 2006 15:41:34 EST

In recent years, when interest rates in the U.S. were low, hordes of homeowners and investors in real estate grew wealthier as they watched their home values increase or their investment properties sell for multiples of their purchase price. But now, with interest rates rising, the run-up in real estate may be ending. What will happen next? Experts from Wharton and elsewhere debated this question at a conference on innovation and risk in real estate markets, organized by the Wharton Financial Institutions Center and Mercer Oliver Wyman.

Protecting the Value of Real Estate-Rich Portfolios

Wed, 15 Mar 2006 08:41:13 EST

Perhaps more so now than in the recent past, the fate of the U.S. real estate market hinges on the behavior of interest rates. Meanwhile, the trend toward legally enforceable titles has only just begun in many emerging markets, making them an unsure bet for investors. Given these variables -- which are difficult to predict and represent significant risk -- many real estate entrepreneurs are looking for ways to protect their portfolios. While predicting the movement of interest rates is notoriously difficult, investors in real estate would do well to understand the market forces at work in the sector. In this special report, experts from The Citigroup Private Bank and faculty from Wharton weigh in on the direction the real estate market is headed -- in both the U.S. and abroad -- and offer insights on ways investors can reduce the risk exposure of real estate-heavy portfolios.

Is Commercial Property Still a Good Investment?

Wed, 27 Jul 2005 16:50:59 EST

These are blissful times for commercial real estate investors. Having fallen into a deep slump with the ending of the Internet boom, the market has come surging back. In 2004 alone, prices rose 26% for apartment complexes, 21% for industrial properties, 14% for retail properties and 6% for office buildings, according to Real Capital Analytics, a New York real estate research firm. At the same time, however, a number of major institutional and private investors have been selling off large chunks of their portfolios of prime commercial real estate and putting the sale proceeds into less expensive real estate or into other assets entirely. Wharton experts and others look at real estate's revival as well as its risks.

Are Easy Liquidity and Razor-Thin Returns Driving Real Estate to Dangerous Highs?

Wed, 13 Jul 2005 15:36:49 EST

Huge capital flows into real estate may represent too much of a good thing, according to participants at a recent meeting organized by Wharton's Samuel Zell and Robert Lurie Real Estate Center. According to Wharton professors and industry experts, excessive liquidity is leading to a decline in underwriting standards that potentially could hurt the industry in the future.

The Mega-Deals Are Back in Commercial Real Estate

Wed, 09 Feb 2005 16:50:03 EST

Investors who had fled bricks-and-mortar industries such as real estate during the dot-com and telecom bubbles have now returned with a vengeance. As a result, lots of capital is available for massive real estate deals, according to Wharton professors and industry experts who spoke at a meeting organized recently by the school's Samuel Zell and Robert Lurie Real Estate Center. Complexity and risks are high in such transactions, but so are the potential rewards.

Why Real Estate Escaped the Recent Wave of Scandals

Wed, 30 Jun 2004 11:55:47 EST

Unlike the 1980s boom, whose aftermath revealed a host of shady deals between real estate developers and unscrupulous S&L executives, publicly traded Real Estate Investment Trusts (REITs) have largely been untouched by the most recent scandals in Corporate America. Sam Zell, chairman of Equity Group Investments of Chicago, believes REITs are likely to remain scandal-free. He and other executives discussed this issue and more at a recent conference of Wharton's Zell/Lurie Real Estate Center.

As Big Money Chases Real Estate, Markets Await Better Fundamentals

Wed, 21 May 2003 00:00:00 EST

Office markets are starting to recover on the West Coast of the U.S., and the recovery will soon spread to the East. That upbeat observation came from Sam Zell, chairman of Equity Group Investments, the biggest office landlord in the U.S. Zell and other experts were generally optimistic about real estate's prospects at a recent meeting of the Zell-Lurie Real Estate Center at Wharton.

What Does the Future Hold For Real Estate?

Wed, 20 Nov 2002 00:00:00 EST

Today�s flat economy, marked by slow growth and low interest rates, bears a close resemblance to the U.S. economy during the Eisenhower years, according to participants at a conference organized by the Zell/Lurie Real Estate Center at Wharton. Still, real estate investors can take advantage of cheap money to find attractive investment opportunities. According to one real estate executive, now is the time to �leverage the heck out of your assets with very cheap debt.�

It�s Boom Time in the Housing Market, But for How Long?

Wed, 03 Jul 2002 00:00:00 EST

The residential real estate market in many U.S. cities shows no signs of slowing down, as eager home buyers continue to drive prices ever higher. Is this too good to be true? Are home prices a bubble that is soon to burst? Real estate experts at Wharton and in the private sector offer their predictions.

In an Uncertain Economy, Real Estate Holds its Ground

Wed, 08 May 2002 00:00:00 EST

Developers and tenants are reining in their ambitions and not taking any chances. Still, the real estate industry has held its ground well amid the uncertainty of the slow, post-September 11 economy, according to Wharton professors and industry experts who spoke during a recent conference at Wharton�s Zell/Lurie Real Estate Center.

Real Estate Industry Poised for Recovery Despite Slowing Economy

Wed, 21 Nov 2001 00:00:00 EST

The real estate industry comes into the current slowdown in a much stronger position than it was in the 1980s. But the industry is also vulnerable to a number of stresses, ranging from scaled-down activities on the part of tenants to a significant decline in cash flows and a softening at the high end of the retail market. Earlier this month, members of Wharton�s Samuel Zell and Robert Lurie Real Estate Center looked at what�s ahead for real estate.

Look for High-Rises to be Shorter, More Secure and Still Anchored in Cities

Wed, 26 Sep 2001 00:00:00 EST

The terrorist attacks that obliterated the landmark World Trade Center towers shattered steel and glass along with the confidence of workers who once found prestige in spectacular high-rise views. But America�s signature skyscrapers and the dense cities that spawn them will remain - in some form - a part of the landscape, suggest Wharton faculty and real-estate industry executives.

Coming Soon: The Discount Broker for Commercial Space

Wed, 18 Jul 2001 00:00:00 EST

How will information technology transform the commercial real estate business? One of its effects may be the rise of the discount brokerage firms, predicts a new study by Joseph Gyourko and Asuka Nakahara of Wharton�s Zell/Lurie Real Estate Center. Part of a project sponsored by the Society of Industrial and Office Realtors, the study also suggests brokers may be paid by the hour rather than by the deal in the future.

America�s Big Cities: If They Get So Much Aid, Why Are They Always in Trouble?

Wed, 06 Jun 2001 00:00:00 EST

�People may not want to live in cities any more, but they sure do want to live in metropolitan areas,� states Wharton professor Anita Summers. If that�s true, why are so many venerable cities like New York, Boston, Philadelphia, Chicago and Washington, D.C. constantly in a state of fiscal crisis? Summers and co-author Joseph Gyourko address this issue in a chapter in a forthcoming book that analyzes the economic and social conditions of U.S. metropolitan areas.

Opportunities for B2B e-Business in Real Estate

Wed, 22 Nov 2000 14:28:29 EST

Real estate developers like John Bucksbaum, CEO of General Growth Properties, the second-largest owner and operator of shopping malls in the U.S., see lots of opportunities to expand their business on the Internet. Bucksbaum discussed the company�s e-business strategy at a real meeting of the Samuel Zell and Robert Lurie Real Estate Center. Other panelists discussed a wide range of other issues, from the impact of B2B e-business on real estate to the way demographics will shape the future of real estate demand.

Vanguard�s Brennan on Stock Market: Resist Temptation; Emphasize Diversification; Stay Calm

Wed, 24 May 2000 14:45:47 EST

Speaking at a meeting of the Samuel Zell and Robert Lurie Real Estate Center at Wharton last month, John J. Brennan, CEO of The Vanguard Group, used historical data and stock market analysis to put in perspective an investment environment that he views as highly risky and too focused on short-term gains. The meeting also included discussion of trends in public and private real estate capital markets and new revenue-generating opportunities in real estate.

Finding the REIT Value

Mon, 24 May 1999 16:56:34 EST

During the past few years, several real estate firms have reorganized themselves as real estate investment trusts, or REITs, to tap Wall Street for capital. But what is the present and future value of the REIT as a real estate investment vehicle? Joseph Gyourko and Todd Sinai of Wharton's Zell-Lurie Real Estate Center investigate that issue in a new paper.