Commercial Real Estate: The Outlook Is Frightening

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investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
kemosavvy's picture
kemosavvy
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Joined: Oct 13 2008
Posts: 254
Re: Commercial Real Estate: The Outlook Is Frightening

in most recessionary cycles commercial real estate is the last vestige of hope before it eventually falls and the last to climb out of the hole.

this sector has been on my radar for quite some time because i have a friend of mine in pheonix, az who works for a commercial real estate developer who said to me just two months ago that construction in pheonix had still not receded from 2005 high's. i can't see how a city of massive drops in home prices, increased layoffs, along with the bills coming due on all those expansionary infrastructure projects can maintain a 'hot' commercial real estate market. the reason my friend gave that building was still underway was that the contracts had been signed years in advance and the flow of money could not be stopped at this point, even under the current economic circumstances.

i heard on cnbc that commercial real estate debt levels would outstrip all banks combined of tier 1 capital. this may be the crash that not even the fed can defend itself from.

sensei's picture
sensei
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Joined: Aug 30 2008
Posts: 26
Re: Commercial Real Estate: The Outlook Is Frightening

I think commercial RE owners are starting to see the light (or is it terrifying darkness?)  I have a friend in Phoenix whose dental practice is slowing down quite a bit.  He asked his landlord for a break and the landlord offered a 20% decrease for signing a new 4 year lease.  I am hearing more and more of this type of renegotiation. Commercial RE owners are realizing they have a choice between almost breaking even or losing the property. Glad I don't own a stripmall right now; I had considered it a few years ago.

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