Most analysts agreed that the commercial real estate market would make a turnaround this year, but they did not predict any particularly speedy moves in the direction of recovery. However, the market is proving more resilient than many expected, “with troubled loans falling, occupancy rising and office building sales surging in the largest markets,” reported USA Today[1] . This is good news not only for the commercial real estate market and participants in it, but also for lenders who were living in the shadow of bad construction loans and commercial loans that many feared would not prove viable for refinance when they came full term. And although Real Capital Analytics (RCA) reported that lenders still were carrying $181 billion in distressed loans in February of this year, that was down $8 billion from four months prior. “Worst-case scenarios have been avoided,” explained RCA economist Sam Chandan.
And in some areas of the country, such as New York City and Washington D.C., the recovery is even more substantial, with “prized building” prices returning to 2007 levels after losses of as much as 40 percent during the downturn[2]. Analysts predict this recovery pace to spread to Dallas, Denver and Houston in the near future, and owners of commercial buildings are taking advantage of stabilizing rents and occupancies to pay down loans, thereby improving the value of their own buildings and their odds of getting new funding when it is needed.
Many economists believe that the real estate market’s recovery as a whole will likely hinge on the recovery of the commercial market. Do you think that the commercial market can pull the residential market out of the mire as well?
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[1] http://www.usatoday.com/money/economy/2011-04-15-commercial-real-estate-turning-around.htm
[2] http://www.ibtimes.com/articles/135561/20110418/commercial-market-exceeds-forecasts.htm
If the banks had the same attitude toward residential as they do toward commercial, they would have saved alot of money and frustration for their customers….. Too bad they’re not smart enough to realize it…..