Loopnet (NASDAQ: LOOP) operates an online marketplace to allow for the purchase of commercial real estate. Of course, the industry has been in a slump for the past two years. That is, transaction volumes are low, credit markets are still frozen, vacancy rates continue to rise and asset prices remain on the down trend.

Yes, it's hard to find any silver lining.

This is not an abstraction: buildings large and small are showing gaping vacancies. Storefronts are empty. Entire buildings sit waiting to be occupied. In Manhattan, retail vacancies have reached their highest rates since 2001. For the second quarter of this year, vacancies hit the absurd height of 12.4%, thanks to unemployment trends that won't quit and consumers reluctant to pry open their wallets.

Retailers are being hit just like the residential market.

The Buffalo News reports that shopping center owner Developers Diversified (NYSE: DDR) is set to close on a deal to sell back 11 properties in upstate New York that it bought from privately-held Benderson Development in early 2004. The kicker: on a price-per-square foot basis, Developers Diversified will be selling out at a steep discount to its original purchase price.

With its stock price currently hovering at about 8/10ths of a penny, Circuit City Stores is nearing the day when it will completely cease to exist.

DJM Realty announced that it is has been retained to oversee the sale of the company's real estate assets. In a press release, Andy Graiser and Emilio Amendola, DJM Realty's Co-Presidents, commented that "Circuit City's real estate has begun to create interest among national and regional retailers and supermarkets. There are great opportunities for schools and other non-retail uses."

Trade groups representing developers and commercial lenders are lobbying Congress for a bailout. They are saying that $530 billion dollars of CMS's (commercial mortgage backed securities) are coming due in three years and $160 billion dollars are coming due next year.

The kinds of buildings involved include office complexes, hotels, shopping centers and other commercial buildings. Much like home mortgages, these CMS's were bundled together and sold to third parties and just as the market for home mortgages collapsed, so too this market's refinancing has all but come to a standstill.

Delinquency rates, though quite low, have been rising up to .96% in November from .62% in September. Some analysts predict this will rise to 2% by the end of 2009.

We now have a new financial dilemma. Congress and the Administration were reluctant to bail out the auto industry. The question again is: should we do this for commercial lenders as well?

The Washington Post reports that the Mortgage Bankers Association (MBA) is getting what it feels is a raw deal on a mortgage for its Washington headquarters. Boo hoo! The MBA is buying a building there for $100 million, but is paying a higher interest rate on its mortgage as its income declines and the leasing market is slow leaving it with no tenants for the building.

This couldn't have happened to a nicer association. After all, the MBA encouraged people to take out subprime mortgages -- many of which went bad. Despite the Fed's rate cuts from 5.25% to 2.25% mortgage interest rates are up thanks to bankers' fear of lending. And the resulting economic slowdown is making it harder for the MBA to find tenants for its building.

Let's survey the damage to the MBA. First, its membership has declined 17% in the last year and it predicts a 10% to 15% decline in revenue as a result. Bankers are making the MBA put up about 10% more of a down payment than it had planned and the lack of tenants has moved its lender to increase the financing costs slightly. Perhaps there's justice in the universe. If not, at least MBA's predicament is giving it a taste of its own medicine.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Commercial real estate developers are no longer immune to the credit crunch hitting residential real estate owners and developers, according to today's Wall Street Journal. Yesterday in visible proof of the problem, a Las Vegas casino developer, Bruce Eichner, defaulted on a $750 million loan from Deutsche Bank because he was not able to refinance the debt. It's not the first time he's been caught up in a credit crunch. The Journal reports he lost several projects in New York City during its real estate downturn in the early 1990s.

The Journal also points out he's not the only one having trouble getting refinancing. Other commercial developers in trouble according to the Journal include:

• A major Australian shopping mall developer, one of the largest owners of shopping centers in the U.S., has been unable to refinance $3.4 billion in short-term debt.

• New York developer Harry Macklowe, who bought office buildings at the top of the commercial real estate market, can't refinance $7 billion in debt that's due in February. He's trying to sell his General Motors Building in midtown Manhattan to come up with cash.

Aluminum Corp of China (NYSE: ACH) volume & volatility spikes on wide price swings. ACH is engaged in bauxite mining, alumina refining and aluminum smelting. ACH is recently up $10.73 to $64.81. ACH closed at $37.04 on 8/16/07. ACH call option volume of 6,490 contracts compares to put volume of 4,671 contracts. ACH September option implied volatility of 88 is above its 26-week average of 47 according to Track Data, suggesting larger price risk.

Open Text (NASDAQ: OTEX) volatility Elevated at 80 into 8/30 EPS & Outlook. OTEX develops, markets, sells, and supports enterprise content management solutions. OTEX is recently down $0.29 to $19.98. OTEX will report EPS on August 30th. Canaccord Adams says: :We maintain our Hold recommendation and U.S. $18 target based on our Discounted Cash Flow analysis." OTEX September option implied volatility of 80 is above its 26-week average of 50 according to Track Data, suggesting larger risk.

Corus (NASDAQ: CORS) volatility elevated on exposure to commercial real estate. CORS is an active commercial real estate lender nationwide, specializing in condominium, hotel, office and apartment loans. CORS had outstanding commercial real estate loans and construction commitments of $8 billion as of 6/30/07. CORS over all option implied volatility of 60 is above its 26-week average of 49 according to Track Data, suggesting larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

For the past couple of months I have written a lot about the weak real estate market, almost all of which has been negative, but don't tell that to Somerset Partners LLC. It was announced today by the Wall Street Journal (subscription required) that the New York-based private-equity firm won the bidding on an office building in New York City that represents that highest per square foot price of any building in the history of the country!

The property in question is located at 450 Park Ave. and went for a whopping $510 million dollars. If you were to break that price tag down to a per square foot basis you are talking about $1,589 a square foot. Not too shabby in a country with a weak real estate market.

The building last changed hands back in 2002 when the price went for $492 a square foot for a total cost basis of around $158 million. Not a bad investment to say the least. We are talking about a $352 million profit over the last five years, representing a little over a 222% percent change! Not too shabby at all.

With prices falling for the housing market, many analysts had been expecting that the trend would carry over into high-end office developments as well. This just does not seem to be the case. The previous record for the most expensive per square foot office buildings was set just a month ago when Italian based Gruppo Zunino agreed to pay $1,476 a square foot for New York's 660 Madison Ave.

Microsoft has said it will spend $2 billion on new technologies to combat the threat of Google, Yahoo!, eBay and the like. Which to shareholders means operating expense, to Google means let's throw a hundred products against the wall to see what sticks, and to college grads means money money money. But to Redmond, Washington?

It means cranes, concrete, and an "eye-popping" real estate market. A company headquarters that now employs 30,000 people could add 12,000 in the next two years -- 3.1 million square feet, or 14 new buildings to be constructed. As the New York Times points out, for Seattle "those are staggering numbers."

Seattle may be happy, or not. On one hand, the unemployment rate will certainly decrease if Microsoft is going new-hire crazy. On the other hand, the city is already clogged with traffic and real estate prices are ridiculous for the relatively small market.

[Photo OsakaSteve]