….Well, I did say “it isn’t so” and still do say that the predictions of impending crash of the commercial real estate market are greatly exaggerated. I was recently quoted by James Thorner, of the St Petersburg Times about my feelings on the market. I believe I was the only Tampa commercial real estate broker or professional in the article that felt the gloom and doom is over done. Is there stress in the market? You bet there is. Vacancy rates are at their highest in years. Values have fallen in the area on average between 30-40%. The loans on all of these deals that were made at the peak of the market will have to be renewed in the next 3 years. Under normal times, these loans would be challenging if not impossible to renew. BUT….these are not normal times.
The banking system has been rocked from the collapse of the residential and derivatives markets. The sytem has been leaking water like an old wooden skiff. The regulators and elected officials have decided that it would not be a good idea to kick the teetering financial system over the cliff. As was mentioned in previous posts in this blog, the IRS and FDIC have provided new guidance in regards to easing renewals of loans that are performing, but failing to meeting current underwriting standards (called performing/non-performing assets).
I don’t think these measures can be taken lightly. The government has the ability to stamp out a commercial real estate fire or at least keep the burn a controlled one. Certainly, the bankers I have spoken to have felt some of the pressure taken off, particularly from the FDIC guidance (although, you can trust me that they are not sleeping soundly these days, regardless). And, I don’t believe these will be the last actions government bodies will take to make sure the “problem can” will be kicked down the road. The general call to action is “A rolling loan gathers no loss” and this will be the recipe du jour for some time to come. Are we facing tough times? Yes, the commercial market will be a tough slog over the next few years? But, what about Armageddon? Nope. I don’t see it happening, not this time anyway.
For those interested, here is Mr. Thorner’s article from the Sunday paper:
Commercial Real Estate Crash Coming, Many Say
By James Thorner, Times Staff Writer
In Print: Sunday, November 8, 2009
We all know why home foreclosures are bad. Nose-diving home values and neighborhood blight are just two of the ugly offshoots of mortgage defaults.
But should we care if the neighborhood shopping center, office park or condo project go bust?
We should. A lot.
Experts fear that a commercial real estate meltdown, following hard upon the housing collapse, could prolong economic turmoil in a Tampa Bay region (…..for the complete article)
