Commercial Real Estate - What is the Present Status?

U.S. Real estate markets are not so-healthy as theydragging their feet in coming forward to extend new
were for decades. First the residential property sectorloans. In the situations of default and foreclosure also,
was plagued by the foreclosure crisis and is yet tothey are not rushing into the decision of foreclosure of
recover from the devastation. Arising out of thethe property immediately, but consider all possible
foreclosure crisis, there were many cyclic reactions inalternative outlets and compromises with the
the financial market. The cash-crunch spread fast toborrowers.
other areas of financial activities - like auto loans; creditObviously, rather than individuals, mostly institutions and
card purchases; hotel room occupancy; businessLLCs are involved in commercial foreclosures and in
revenues in shopping malls; renting office complexesdire situations of foreclosures, they tend to select the
and so on. Commercial new construction projectsinsolvency route, to escape foreclosures.
were either put off or abandoned totally, aggravatingIn this context, it is pertinent to take into consideration
unemployment problem etc.what the experts in the Industry say about the present
The commercial real estate market is inevitablystatus of commercial property sector and
inter-related with all the above businesses. As such theforeclosures. While the predictions about the future of
depletion in business revenues is reflected incommercial real estate vary from person to person,
foreclosure of commercial properties also. How? Forthere is unanimity among them about the density of
example, if a big hotel losses heavily on revenue bythe problem of commercial foreclosures, presently.
the non-occupancy of its rooms, ultimately financialAccording to James Lockhart, vice chair of WL Ross
commitments, including the mortgage repayments get& Co. New York, there are a lot of distressed
hard-hit. The situation of default in mortgagecommercial properties facing foreclosures with small
repayment, consecutively for months, eventually leadscommercial banks as of date. The problem institutions
to foreclosure and distress sale of the commercialholding commercial properties in their business have
property concerned. Needless to mention a distressincreased to 775, whereas there were only 50 of
sale will bring the market value of the property deepthem, just a few years back.
down.The impact of commercial foreclosures has led to
Which branch of commercial properties is mostclosing of financial institutions in huge numbers. Of a
affected? We have come across news reports abouttotal of 8,000 U.S. banks dealing in commercial property
the commercial foreclosures - particularly in the hotelfinances, already 250 have been closed; 1300 banks
sector - the affected hotels of luxury located in thehave been advised by the regulators, to reduce
tourist industry hot-spots of Las Vegas in Nevada,concentration of Commercial Real Estate property
Florida, and California etc.loans; and many of them are expecting closure or
What is strikingly different in residential foreclosurestaken by stronger competitors.
and commercial foreclosures is - when a residentialHowever, in the Real Estate industry circles, it is
property is foreclosed, the amount in loss of money isreported that in a "Sentiment Survey" conducted
about few thousands of dollars, whereas in aamong 100 senior real estate personnel by the Real
commercial foreclosure, the amount involved runs intoEstate Round Table, during the second quarter of this
millions of dollars.year, 82% of the participants expressed satisfaction
It is for this reason, the lending institutions extendingthat the commercial real estate market is better than
financial supports for commercial property projects arelast year.