Commercial Real Estate problems

[melscuba]

In asking around I'm getting consistent opinions that we need to brace for another wave of problems with banks and "toxic" loans, only this time it will be in the commercial real estate market. Furthermore, this will be so far reaching that the banks will be willing to slash REO properties again just get them off the books. Any opinions? If anyone is in agreement with this line of thought when will this start to happen? Also, I'm catching wind of us being in both an inflationary period where necessities (food, electricity, gas, etc.) will cost more and a deflationary period where our assets (homes, stocks, cars, etc.) will continue to lose value. How do we protect ourselves during this time? If our money in the bank is losing value and so is real estate, where should we put it? (and don't say stocks!)

 

[5thGenFlo]

In asking around I'm getting consistent opinions that we need to brace for another wave of problems with banks and "toxic" loans, only this time it will be in the commercial real estate market. Furthermore, this will be so far reaching that the banks will be willing to slash REO properties again just get them off the books. Any opinions? If anyone is in agreement with this line of thought when will this start to happen? Also, I'm catching wind of us being in both an inflationary period where necessities (food, electricity, gas, etc.) will cost more and a deflationary period where our assets (homes, stocks, cars, etc.) will continue to lose value. How do we protect ourselves during this time? If our money in the bank is losing value and so is real estate, where should we put it? (and don't say stocks!)

Interesting delima you pose. I really don't like being a doom sayer, but I have to put my prediction somewhere, and this is as good a place as any. As a baby boomer, having lost money after the dot com bubble burst, having lost money after 9/11, we decided to invest in real estate, and now that's tanking. Here's my plan for the immediate future. I'm keeping my real estate holdings, even though their inflated values have a long descent ahead of them, I'm going to invest in the stock market, backed by the full faith of the government stimulus package. BUT, when the DOW hits 9500 and I can see some simblence of savings, that I once had in the stock market, I and a bunch of my fellow baby boomer buddies, who've seen their stock portfolios, aka their retirements ripped from their accounts in the past, will most likely take our money out of stocks and invest in certificate of deposits or T-bills or at worse a good ole fashioned mattress. At least then, we will be able to rest easy about our retirements with what we'll have and not what we lost. I'm wondering how many other baby boomers will do this? My prediction is another run on wall street when the DOW is back up close to the 10,000 mark, by baby boomers who want to keep something/anything for their retirement and to heck with everything after that.

 

[TooFarTampa]

I have a pretty good handle on what landlords are facing in my neck of the woods (Tampa) and in the past 6 weeks or so there has been a breath or two of life. I've noticed that a number of people who had planned to start businesses are wading in, which helps the landlords pay the mortgage. The landlords are realizing that they have to make deals on rent regardless of what they paid for the property in the past several years. Many of them are doing this. In the first three months of this year we saw an alarming number of stores close, but the rate of attrition seems to be slowing.

There is one major upscale shopping center that I think could be facing bankruptcy. That would be very alarming. The place changed hands in 2005 and is struggling mightily to stay relevant. Most other major retail centers are doing OK.

I think as long as there are "green shoots" in the economy, people who want to move into an empty storefront will be more willing to try it, if they can get a good deal on the rent. If things start heading south again you will see more businesses shut down and more empty storefronts.

This is just what I'm seeing around here -- but Tampa IS considered one of the shakiest markets overall.

 

[melscuba]

Interesting delima you pose. I really don't like being a doom sayer, but I have to put my prediction somewhere, and this is as good a place as any. As a baby boomer, having lost money after the dot com bubble burst, having lost money after 9/11, we decided to invest in real estate, and now that's tanking. Here's my plan for the immediate future. I'm keeping my real estate holdings, even though their inflated values have a long descent ahead of them, I'm going to invest in the stock market, backed by the full faith of the government stimulus package. BUT, when the DOW hits 9500 and I can see some simblence of savings, that I once had in the stock market, I and a bunch of my fellow baby boomer buddies, who've seen their stock portfolios, aka their retirements ripped from their accounts in the past, will most likely take our money out of stocks and invest in certificate of deposits or T-bills or at worse a good ole fashioned mattress. At least then, we will be able to rest easy about our retirements with what we'll have and not what we lost. I'm wondering how many other baby boomers will do this? My prediction is another run on wall street when the DOW is back up close to the 10,000 mark, by baby boomers who want to keep something/anything for their retirement and to heck with everything after that.

So if that be the case with stock purchases, and I bet there are more than a few out there with your thoughts, there is a false climb in the market right now, with a further downslide after a certain point? I ask this because the market seems to be going up (and I haven't looked today) for no realistic reason other than faith in our government to not let these banks fail. What if it can't be avoided? What if the commercial real estate issue is a true problem headed our way?

Furthermore, what will it do to residential real estate? and how does all of this play into the 30-A market?

Thank you for your previous input.

 

[Lynnie]

So if that be the case with stock purchases, and I bet there are more than a few out there with your thoughts, there is a false climb in the market right now, with a further downslide after a certain point? I ask this because the market seems to be going up (and I haven't looked today) for no realistic reason other than faith in our government to not let these banks fail. What if it can't be avoided? What if the commercial real estate issue is a true problem headed our way?

Furthermore, what will it do to residential real estate? and how does all of this play into the 30-A market?

Thank you for your previous input.

Everyone I've spoken to regarding the trend in the exchanges during a bear market is exactly as you stated......a climb and then a sharp drop. I have heard predictions of the DOW going up to $9,500, then dropping rapidly to $3,000.
Dropped about $200 today.

For commercial real estate, have been hearing it will tank just like residential and in many markets already has......lot of vacancies driving around Atlanta, but if it's a good project and the lender likes it, you can still get funding if you are buying.......just a little tougher and longer process.

I am preparing for ugly inflation, too. Shifting assets and liabilities as much as I can now; and. I was going to suggest mason jars and the mattress like 5thGenFlo, but seriously CD's and T-bills in smaller amounts spread among a few banks. Safe deposit box at the bank - no interest to earn, but safe place.

Maybe this calm right now is the calm before the storm????

 

[ASH]

Commercial is going to take a serious hit in the near future. While residential markets have been in the toilet for the last three years, commercial properties kept going.
That's all about to come to a screaching halt when a bunch of people finally realize that it's not true to say " build it and they will come".

It was just in the WSJ the other day about the huge commercial lending company about to go belly up that is taking 166 malls with him. Not a single building.....the whole mall!

Watch how quickly Obama steps up to pour money in those pockets. Here we go again.

 

[PalmBeach]

"Predictions are unreliable - particularly concerning the future" - Dr. Lawrence Peter

 

[melscuba]

Commercial is going to take a serious hit in the near future. While residential markets have been in the toilet for the last three years, commercial properties kept going.
That's all about to come to a screaching halt when a bunch of people finally realize that it's not true to say " build it and they will come".

It was just in the WSJ the other day about the huge commercial lending company about to go belly up that is taking 166 malls with him. Not a single building.....the whole mall!

Watch how quickly Obama steps up to pour money in those pockets. Here we go again.

166 malls??? I can't get my brain around it. I don't see how, as a nation, we can continue to leverage ourselves and future generations for more bailouts. I also can not comprehend the ripple effect these kind of closures are going to have. Seriously, this has to only damage the residential market further, does it not? I think of 30-A as mainly a luxury home, and 2nd home market. I wonder how instances like this will effect the area.... more or less than urban or suburban areas???

 

[rehunter]

166 malls??? I can't get my brain around it. I don't see how, as a nation, we can continue to leverage ourselves and future generations for more bailouts. I also can not comprehend the ripple effect these kind of closures are going to have. Seriously, this has to only damage the residential market further, does it not? I think of 30-A as mainly a luxury home, and 2nd home market. I wonder how instances like this will effect the area.... more or less than urban or suburban areas???

It is GREATLY effecting the area. "Luxury 2nd home market " is probably not to high on the list of many Americans today that are just trying to keep their heads above water.

 

[ASH]

And now I wonder how many of the 1,100 GM auto dealers getting dropped today are going to become more empty commericial buildings. And that is just the start. They plan to drop 2,000 more.

What fries my shorts about all this is the article in the WSJ yesterday that GM plans to begin importing cars to the US built in China. GM is using the $15 billion given to them to lay off 21,000 people and subsidize US job losses.