Foreclosures Frown On Commercial Real Estate
November 24th, 2008
Foreclosures are frowning on commercial real estate. Their prospects for 2009 are gloomy. The headlines are loud and clear without any signs of stopping – Circuit City is seeking protection via bankruptcy, DHL is cutting its operations in USA, Wall Street is giving out pink slips galore. The writing is on the wall – suddenly the prospects of commercial real estate look bleak. The ever-hungry foreclosure demon is now eyeing it. So far the renters and vacant shopping centres in the office buildings had been bearing the brunt of the foreclosure crisis. But now it seems that industrial houses and complexes will no longer remain immune from it.
Robert Bach is the chief economist of Grubb and Ellis Co. He said, “It blows my mind how fast this has happened. We had thought commercial real estate would be okay because it wasn’t overbuilt.”
Foreclosures are eying commercial real estate with greed. Nearly $36 billion of commercial real estate mortgages will expire in 2009. Approximately $55 billion of mortgage debt will roll over yearly by 2012. It is a significant spike from the last few years commented Glen Esnard, of the marketing division of Grubb and Ellis. If days had been normal these debts would have been easily financed but the picture is quite different now with recession clouds hanging over the country. Esnard added, “A lot of that won’t be (refinanced) at current rates or terms. Lenders will have to take action on these loans.”
Esnard apprehends that delinquencies and foreclosures on commercial properties will “surge” in 2009, as the landlords will fail to refinance. Right now the rate is 1%. The danger point is when it touches 4% or 5%.
An increase of foreclosures in this sector will be another fatal blow to the already mauled market. It will again send shudders through the global markets and retard efforts by governments around the world to plug the financial bleeding so as to boost the confidence of the consumer.
Even if the clouds partially clear in the following year the situation in commercial properties will not improve till 2010. It will come too late for landlords seeking refinancing today. Robert Bach said, “Defaults on these loans could continue for several years.”
Till now the blame for the foreclosure crisis has been put on the sub-prime mortgages involving residential units. It seems the general slump of the economic and the drowning of the real estate market is dragging down everything with it.
- Foreclosed Properties are now Being Handed Over to Habitat
- The Foreclosure Crisis has Pushed Many to Find Other Sources of Lendin
- It Seems that if the Senior Citizens are the Only Ones Who can Tackle this Foreclosure Crisis
- Foreclosures High; Columbus to Receive $23.2 million as Aid
- The Foreclosure Crisis has Added to the List of Minorities – the Brokers of Wall Street
- Foreclosure Alarm Bells are Ringing for the Deaf
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