I have been wondering if the BAILOUT Rescue Bill that was pushed through
Congress will help or hurt commercial real estate. As the bill stands, banks are not under any
pressure to loan money. Under the best of circumstances the
money that has been allocated to the banks will be freed up for loans.
If banks will then start to lend once again based on the value of the cash flow of each
individual property, then I believe that the commercial market will rebound much faster
than the residential market. The only exception that I see lies within retail.
When there are so many retail stores and chains in trouble facing bankruptcy it is hard to imagine a
quick turnaround. In fact, retail as we knew (know) it may never return. It even looks like the large malls
may be phased out.
If the banks don't start funding commercial real estate soon then the entire commercial market will remain
in trouble. There are plenty of willing purchasers for commercial buildings, and many have signed contracts
of sale, but they will never close because the buyers don't show enough income without the banks
taking into consideration the revenue the buildings produce. Actually, most are not allowing that income
to be used at this time.
Since the Government has entered the private sector, I hope that it will follow the example of the European
Governments who have demanded more from their banks. They have stipulated that the banks may not just
hold the money as many of our banks are doing, but that they must make loans as well. To correct our
commercial real estate market in the United States only one thought comes to mind... The cash must flow.