Is Commercial Real Estate About to Follow Residential Real Estate Down?
So far, commercial real estate has remind fairly insulated against the problems afflicting homeowners. However, there are signs that commercial real estate could be on the verge of following residential real estate lower.
Part of the problem is that commercial real estate is about to be hit by the slowing economy. There are a few factors at play when it comes to commercial real estate right now:
- Difficulty getting loans. Businesses are not having much more luck getting loans than those seeking home mortgage loans. This means that businesses that want to buy new premises are going to have trouble getting the loans they need to purchase commercial real estate.
- Defaults could be on the way. As the economic downturn starts to affect customers, there are some businesses that will not be able to make the money needed to make payments on their commercial real estate loans. Some may have to exit lease agreements, leaving their landlords without a source of income. Defaults on commercial real estate in turn affects investors and lenders alike.
While the signs are just beginning to appear now, the expectation is that 2009 will be a pretty bad year for commercial real estate. Perhaps the sector will not see problems as widespread as the residential real estate collapse, but the effects will still be there, and they will add their own ripples through the economy.
According to experts interviewed for the Emerging Trends report from PricewaterhouseCooper, a recovery should begin in 2010, but it will be slow going, since risk aversion and financing issues will still be of paramount concern. And, of course, the economy is expected by many to still be sluggish until 2010 or 2011. No matter what politicians say, many economic analysts are hunkering down for a prolonged recession.
Tags: commercial real estate, residential real estate, home mortgage loans, lenders,
real estate, economy, loans
