Office Brokers, Banks Facing Market Woes

By JEFF D. OPDYKE Regulators currently performing stress tests on the country's largest banks are looking at commercial real estate as a possible source of concern. But brokers who lease and sell these properties wouldn't need a secretive stress test to offer an assessment. Those businesses have been miserable lately. That much will be evident when Jones Lang LaSalle reports first-quarter earnings after the market closes Tuesday and CB Richard Ellis Group reports Wednesday afternoon. The companies are among the nation's largest commercial real-estate brokers and services firms. Getty Images The GM Building is one of many New York office buildings managed by Jones Lang LaSalle, according to the firm's Web site. With unemployment rising, more office space is the last thing most companies need, leaving leasing in the doldrums. As for those who might want to buy, financing is practically nonexistent. The losses both companies are expected to report should come as little surprise to investors. At this point, Wall Street's focus is less on current brutal market conditions than hope for what is ahead this year. The stocks of these companies have rebounded off their 52-week lows in recent months largely in anticipation that buildings will start selling again, as banks and other lenders start dumping properties taken back in foreclosures. It will be discounted deal activity, but activity nonetheless. The big issue for banks is at what price. The mere presence of sales wouldn't necessarily mean the market is back to health. In fact, it is at that point that some of the most-intense pain will be felt by banks, which will have to take losses on loans as part of many sales. That could bring on a whole new wave of woe for the broader economy.