Boy, did commercial real estate hit an iceberg! And the great ship is sinking and in a very cold sea of total indifference. Wall Street, Main Street and Pennsalvania Avenue have other, more pressing, voter-centered, problems.
The few deals we read and heard about are both fewer and farther, and farther apart.
For Sale and For Lease signs are everywhere with not a qualified buyer or tenant in sight. Potential buyers and potential tenants simply can't obtain financing.
Yes there are some "minnow deals," but not enough.
Sellers and property owners haven't come to the realization that the demand for commercial buildings and space has sunk to a new low and that property values are sinking lower than a whale's belly.
It may be a recession in residential real estate but it's a first class depression for commercial real estate.
Commercial real estate is just like the Titanic. Thought to be invincible, unsinkable, it hit a giant ice cube and the grand party ended.
Too many over ambitious speculators simply overpaid for commercial real estate assets in the past decade and the great bubble has burst.
Many owners cashed in on the "bubble" by over-financing and driving themselves into deeper debt.
Each day with out a deal, without an actual arms-length, conventional financed, transaction, means recovery is way off in the distant horizon.
Unsold and unleased inventory is rising. Owners take the age old action of rapidly replacing one broker with another who equally has no suspects let alone prospects!
The real bad news in the retail sector will problaly hit in the Fall as many more stores will be foreced to close because of the slumping economny. Add to this mix about 1,000 to 2,000 car dealerships that will be soon on the block.
The stotic bankers are going to see a new brash wave of old time "walk away" commercial owners plus now unstoppable foreclosuers. Banks, once they take over these commercial, large and expensive to maintain, truly non-performing assets, wll be faced with maintaining expensive commercial real estate or dumping'em at any price.
It's not a pretty sight. And the cure, or correction is simply going to take a long, long time. I wouldn't bet the farm on a speedy recovery.
Bill McInerney
BUYING OR SELLING? CALL BILL MCINERNEY 617 816 3933
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