While recent reports speak of the first wave of residential foreclosures nearing its end, even Wall Street seems eerily quiet about the tsunami of commercial foreclosures looming in its wake. With many cities across the U.S. still reeling from the residential real-estate meltdown, reports coming out of key markets like New York, Las Vegas, and L.A. suggest a far more serious storm is brewing.
Already comparisons are being made to the fall of the commercial market in the early 1990's that was triggered by the savings and loan crisis, with some experts predicting a far more frightening scenario. The Wall Street Journal reported banks could suffer as much as $250 billion in commercial real estate losses and 700 banks could fail because of that exposure.
In Las Vegas, Nevada alone more than a quarter of commercial properties are either in default or have been foreclosed upon. The value of those loans: 6.4 billion dollars and growing. That figure represents a 36% increase since early 2008. And Las Vegas only ranks second on the list of hardest hit cities, with New York taking the number one spot and Los Angeles running a close third.
It is another crushing blow for many lenders still dealing with record numbers of residential foreclosures, and for countless developers already struggling with high vacancy rates. The real kicker is that this is only the tip of the proverbial iceberg. Once lenders begin selling the foreclosed properties at reduced rates, new owners are expected to entice tenants with lower rents, creating an atmosphere in which surviving developments cannot compete and causing a second wave of foreclosures.
But, just as the residential real-estate bust opened doors of opportunity for the wise investor, so too does the incoming tide of commercial foreclosures. Those who have been keeping their investment dollars close to the chest may soon find opportunities that they cannot afford to miss, and real-estate brokers and their agents should be poised to capitalize on what may prove to be a very profitable market.
Comments(3)