Friday, February 19, 2010
Massive CRE Problems on the Horizon...
Have you looked at any recent Planning Commission agendas and noticed a lack of commercial real estate items?
If you live almost anywhere in the U.S., you likely saw just that. Hardly any rezoning, development plan, or other land use hearings related to commercial development.
This Washington Post story explains why:
Nationwide, at least $1.4 trillion in commercial real estate debt is expected to roll over during the next three years. Warren said that half of commercial real estate mortgages will be underwater by the beginning of 2011. A fifth of residential mortgages are underwater now, she said.
Unlike residential mortgages, which often can be paid over 30 years, commercial real estate mortgages typically must be paid off or refinanced within five years. Commercial properties mortgaged in 2005, 2006 and 2007, at the height of the boom, are reaching their maturity date. "Do the math on this," Warren said. "This is a significant problem."
If you thought that the residential property downturn was steep, wait until you see the effects of the CRE crisis in full effect.
--Chad Emerson, Faulkner U.