Signs are growing that commercial real estate’s precarious hold on stability may be slipping. Since the start of the year, federal regulatory authorities have shut down nine banks – a whopping five alone last Friday in New Mexico, Oregon, Washington, Florida and Missouri.
Commercial real-estate losses were responsible for a majority of the nine failures, according FDIC.
Another grim metric: GE Capital posted a small profit last week – which would have been higher had the company not been dragged down with sour commercial real estate loans.
Ever since the start of the crisis, there has been a race between the huge pile of debt coming due – debt that was underwritten against standards that will never fly in this market – and policy makers and industry representatives hastily putting together unprecedented rescue programs that might bridge the gap.
While there was plenty of argument about the stimulus package and its effectiveness, rescue measures for the commercial real estate industry – namely TALF – have been deemed a success.
Now the question is, as the number of failed banks grows – not to mention sour real estate loans – were these measures enough to stem the rising flood that is clearly coming.
Compounding the effect on the economy, unemployment equates to a drop in physical, rentable space of approximately 293 sq. ft. per unemployed individual. When these bdistressed properties become vacant, who will be the caretaker to make sure they are “fed and nourished”. Left unattended, the nation’s distressed real estate will become a blight to the neighborhoods they reside in and further erode the stability of the neighborhoods they used to serve.
Excellent article. i hope more and more topic.