Liberty

Commercial Real Estate: The Reality Is Not as Bad as It Looks

I think the author makes a good point, which is commercial real estate is not as bad as it seems. I think its understood by all that CRE is doing poorly. 'Maturity defaults' appears to be the best answer for most lenders facing a loan expiration that cannot be refinanced at today's more onerous loan terms. (The banks and borrowers actually have little choice on this). Commercial real estate values are probably fairly close to their values in 2003-2005 in my experience. Hence, the author's example is a fairly good one - reflective of typical properties today. Give the economy about 24 to 36 months, and rents will be growing again and vacancy fundamentals will be more sound. Borrowers will generally be much more able to refinance at market oriented terms in 2 to 3 years from now, not really a long timeframe for most RE investors.