When I was a young man growing up in the 1960s…yes, I am that old…one particular of the cool shows on Television was HR PufNStuf. About nine million jobs are generated or supported by commercial real estate which includes jobs in construction, architecture, interior style, engineering, creating upkeep and security, landscaping, cleaning solutions, management, leasing, investment and mortgage lending, and accounting and legal solutions. In the years preceding the present crisis, a series of trends pushed smaller and neighborhood banks toward higher concentration of their lending activities in commercial real estate.
If the borrowers can’t refinance, financial institutions may face the unenviable process of figuring out how best to recover their investments or decrease their losses: restructuring or extending the term of existing loans or foreclosure or liquidation. There is no way to predict with assurance regardless of whether an economic recovery of enough strength will take place to minimize these dangers before the large-scale want for commercial mortgage refinancing that is expected to begin in 2011-2013. The maximum loan quantity under this system is $500,000 and the SBA offers a guarantee up to 85% of the loan quantity.
The current distribution of commercial real estate loans could be especially problematic for the modest enterprise neighborhood because smaller regional and community banks with substantial commercial real estate exposure account for nearly half of little business loans. If the comparable sales inform a single story and your broker is recommending a price that is substantially larger than the market, ask him why.
But delaying write-downs in advance of a hoped-for recovery in mid- and longer-term property valuations also runs the risk of postponing recognition of the expenses that must ultimately be absorbed by the financial technique to get rid of the commercial real estate overhang. There appears to be a consensus, strongly supported by current data, that commercial real estate markets will endure substantial issues for a quantity of years. For the final several quarters, delinquency prices have been increasing considerably.
The right response would be that your constructing has unique amenities that buyers will worth and that there is a shortage of buildings like yours on the industry for sale. The rising number of delinquent, defaulted, and non-performing commercial real estate loans also reflects rising levels of loan risks. At today’s super low interest rates, your rental costs are fixed at super low lease prices.