Archive for the ‘Commercial Real Estate’ Category

Anyone Else Worried About The Commercial Real Estate Market?

From what I’ve read, commercial real estate foreclosures are happening now, at record levels, and more are imminent. There’s something like $1 trillion plus of commercial real estate loans that are maturing between 2010 and 2013.

What happened? I think the same type of exaggerated optimism we all saw in the residential marketplace spread to the commercial real estate marketplace. Ownership opportunities were fueled by political, economic, lending and social forces.

Like the residential real estate market, the economy in the years 2005-2007 pushed commercial rents up and the overly high valuations followed.

In 2008, when the economy went South, commercial real estate values followed suit and left lenders, many of which are small to medium sized community banks, with over $1 trillion of commercial real estate loans maturing over the next couple of years.

“ According to Real Capital Analytics, the default rate for commercial property mortgages held by all U.S. banks more than doubled in the fourth quarter of 2009 and may reach a peak of 5.4 % by the end of 2011.”

Sadly, and I suppose predictably, many commercial real estate owners are walking away from their properties, just like many in the residential sector.

These defaults and free-falling prices in the commercial real estate market are going to lead to more substantial bank losses at a time when banks are already taking serious losses from home mortgage defaults.

Even more disturbing is that a disproportionate share of these losses will be shouldered by small and mid-sized banks. The communities they serve, will also feel the pain.

“ A big enough wave of commercial mortgage defaults would trigger economic damage that would touch the lives of every American.”

The extent of the damage will, in my opinion, be tempered by the speed of our economic recovery.

So what do we do in the meantime? Communicate, cooperate, adapt, change, grow and know that this is a cycle. We will always have them and we will work through them.

Please share your thoughts by leaving a comment.

For more information on the Mammoth Lakes real estate market, please log onto my real estate website at www.easternsierraproperties.com

References:[i]

  1. And Now Get Ready For The Commercial Real Estate Knockout Blow. Michael Snyder. Business Insider. The Money Game. March 19, 2010 9:50AM
  2. Massive Bank Failures Due, Says Oversight Panel. Charlotte Cuthbertson. Epoch Times Staff. February 25, 2010

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