Commercial Real Estate Under Threat – The Next Bubble at Critical Mass

With retailers posting abysmal numbers, thousands being laid off from the retail sector, and mall operators and strip malls being close to defaulting on loan obligations, i postulated in Retail Bankruptcies Soar – Another Bubble Bursts   that the commercial real estate market is the next segment of the economy to be threatened with collapse. 

This morning, Mike Shedlock confirms my suspicions in CRE Loan Distress Levels Escalating Rapidly:

“Commercial real estate distress levels are escalating rapidly.”

“This is a good report by Costar and there are more charts and lots more information in the report by state. The report also highlights a list of the Top 10 Largest Specially Serviced or Delinquent Loans. It’s an interesting list that includes a casino, multi-family units, office space, raw land, two hotels, and two retail shopping centers.”

CalulatedRisk in Fed’s Beige Book on CRE: “Grim and Depressing” provides an overview of commercial real estate markets throughout the USA:

“Commercial real estate markets deteriorated in most Districts. Contacts in the Boston District described the commercial real estate market as grim and depressing, and market conditions continued to deteriorate in Richmond. In the Minneapolis District, a contact noted that the market remained in a downturn that has now lasted more than a year. Commercial real estate transactions in the Dallas District have reportedly ground to a halt.”

Reports about commercial construction activity were also downbeat:

In the Philadelphia District, commercial construction activity continued to fall.

Cleveland reported that construction backlogs have declined for some contractors.

Commercial contractors in the Atlanta and Chicago Districts reported declines in building activity and noted that more projects were cancelled or postponed. 

Construction-related manufacturing contacts in the Dallas District reported that demand from commercial construction is shrinking rapidly.

CalculatedRisk closes with:

The other sections of the [FED] beige book are negative too – but CRE is being crushed.

For those who think we have reached the ‘bottom’, think again. We are still in the middle of it, and 2009 won’t be pretty. More retailers will go under, more banks will go under, millions will be laid off. I don’t expect us to see a bottom for quite some time.

Author: Mac Slavo
Date: January 15th, 2009
Website: www.SHTFplan.com

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