The savvy team over at CalculatedRisk has a nice post up titled “The Commercial Real Estate Bust” – it actually went up yesterday. 

As always they have a couple of nice graphs up comparing residential (appropriately including multifamily) with commercial real estate investment as a percent of GDP; the graph with current nominal data is reproduced below. 

Here’s the take home quote in our minds –

In percentage terms, residential has collapsed by about 50% (compared to GDP). Non-residential would have to decline to less than 2.0% of GDP (1.3% of GDP ex-power and petroleum) - the lowest level in history by far - to match the residential collapse in percentage terms.

Also, the recent boom for CRE was much less than the S&L related boom in the ’80s, and even less than the late ’90s CRE boom.

Some areas of non-residential investment have been overbuilt, and I’ve forecast significant declines for investment in offices, malls, and lodging. But those looking for a collapse in CRE investment comparable to the current residential investment bust are wrong.

We’d agree that those calling for the catastrophic collapse of commercial (in most markets) are overly negative, though office and mall retail is taking a beating now, and it will in all probability get worse before it gets better. 

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