Posted by: jhamon | July 9, 2009

Commercial Real Estate: Call the Bomb Squad

Take my cap rate, please!

commercial real estate

Take My Cap Rate, Please

July 9 (Bloomberg) — The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said.

The bottom is several years away, and it will be at least 2012 before there is “palpable improvement” in the commercial real estate market, Parkus told lawmakers at the hearing. “It’s hard to imagine fundamentals improving in an environment where we are beginning to see massive increases in defaults.”The largest concentration of distressed properties is in New York City, Helsel said. Las Vegas, Los Angeles, Detroit, Phoenix, Chicago, Dallas and Boston also have high distress rates, he said.

I’ve spent a fair bit of time with real estate guys over the last couple of weeks.  Everyone seems to the see the tsunami coming with a sense of fatality. 

I’m not buying 2012.  See my post When Will Commercial Real Estate Recover?  2017! for a more sanguine view.


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  1. […] Real Estate: The Fuse is Lit I previously posted an entry entitled Commercial Real Estate: Call the Bomb Squad.  In it, I observed that the $3.5 trillion U.S. commercial real estate market is faced with at […]

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