The recent debacle involving manipulation of the London Interbank Offered Rate caused many to wonder what exactly it is. This benchmark interest rate used throughout the world's financial systems is determined by the British Banker's Association, according to Knowledge@wharton.com.  Everyday at 11 am, 20 of the world's largest banks submit interest rate data involving 10

currencies for 15 different loan terms "The BBA then throws out the top 15 percent of quotes and the bottom 25 percent, and takes the average of the remainder," says Wharton finance professor Richard J. Herring. "This makes it seem highly unlikely that any one bank could manipulate the rate, but on closer inspection, it is possible."

 

While less accurate than other benchmarks, LIBOR has persisted out of tradition and the fact that it incorporates risk into its assessment.  "[LIBOR] is intended to reveal the banks' real cost of money, incorporating all the market's up-to-the-minute assessments of the risk of lending to the participating banks.  In contrast, a US Treasury bond rate, while set more transparently, does not include default risk...so the two rates reflect a different set of concerns," reports Knowledge@Wharton.com.  Find out what alternatives might replace LIBOR by reading "The LIBOR Mess: How Did It Happen -- and What Lies Ahead?"

The uncertain, if not sluggish, economy persists with an unemployment rate of 8.3 percent as of July 2012, according to the Bureau of Labor Statistics. While the most recent unemployment numbers are a vast improvement from rates exceeding 9 percent a few years back, economic growth and hiring remains tempered or slow throughout most of the country. As a result, fewer people are working in office space, shopping in retail space or manufacturing goods in industrial space - keeping these sectors' vacancy rates steady at inflated levels or only slightly improving.

The national office vacancy rate held firm at 17.2 percent in the second quarter of 2012, unchanged from the first quarter, according to information from Reis Inc., a New York firm that tracks commercial property; during the second quarter of 2012, vacancy rates for neighborhood and community shopping centers, and superregional and regional malls decreased by 10 basis points to 10.8 percent and 8.9 percent respectively, according to information from Marcus and Millichap Real Estate Investment Services; and the U.S. industrial vacancy rate remained flat at 9.1 percent in the second quarter of 2012, according to information from commercial real estate services firm Cassidy Turley.

Even though multifamily housing has been the darling of the commercial real estate market - with second quarter 2012 vacancies hitting their lowest point since 2001 at 4.7 percent, according to Reis information - higher vacancies still persist in some areas like Memphis, Tenn., with its 9.2 percent vacancy rate. 

Regardless of overall vacancy rates, if any property is vacant for one day or two years or more, the risks increase along with the potential for expensive litigation and losses. In addition, vacant properties can affect certain aspects of your property insurance.

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