Commercial Real-Estate Crush, The Next Crisis Not to Be Wasted?

market oracle. ^ | Oct 29, 2009 | Matthew_J_Novak

[george76]

As I walked home recently from a weekend trip to the grocery store, I passed a total of 13 vacant offices with signs saying "for lease" or "for sale." These spaces ranged from approximately 500 to 5,000 square feet according to their signs, and they are stretched along a main, commercial street in the center of Tucson, AZ. There is also an eight-screen movie theater that sits empty as well.

These empty commercial spaces ... are empty now, and have been for quite some time.

I found it intriguing that both in the central portion of Tucson and also in a further northwest section (towards the suburbs) of town, the commercial real estate "vacancy density" was about the same.

What if I were an economic advisor in the current Obama administration? What if I were charged to provide statistical evidence supporting the conclusion that we are in the midst of the next crisis that can't "go to waste?"

some groups and individuals are losing a lot of money right now.

there are government economic advisors, who at this very moment are detailing the commercial-real-estate issue to support President Obama's plan to provide the Federal Reserve with more supervisory and regulatory powers.

The threat of multiple trillion-dollar commercial-real-estate write downs is just the kind of crisis that the folks in our government and at the Federal Reserve need to help them rob the American citizenry. Just think of it: irrational exuberance funded by the Fed and soon to be backed by the full faith and credit of the US government.

[mynameisjohngalt]

Fed issued a statement yesterday that there will be no support programs for commercial real estate mortgages. Last 12 mos CRE prices down over 30%.

Right now our economy has overcapacity in every sector. Look out below.

[GeronL]

You wouldn’t believe the empty commercial space in Dallas. Lots of room for those out of state businesses wanting to save some scratch.

[Night Hides Not]

The subject of the coming crash in commercial real estate has been discussed on FR for months.

If the RNC had any brains, they'd hire JimRob as a consultant.

[poodle]

It is a product of designed de-industrialization. The economy is being collapsed by the financial oligarchy. The cure is tariffs, not that any controlled media will carry such a message.

[BenLurkin]

[george76]

Close Up Look at Ugly NYC Commercial Real Estate.

http://dailyreckoning.com/close-up-look-at-ugly-nyc-commercial-real-estate/

[GeronL]

The Fed may have issued a statement but Rahm Emmanuel and Barak-O-Bama, Magic Man, will not let it go to waste.

They are already proposing to make bailouts systemic and automatic. That could bankrupt this country and prop up failing companies at the expense of everyone else.

[Gene Eric]

>> You wouldn’t believe the empty commercial space in Dallas.

That’s a depressing indicator whether on Main St. or back in the industrial parks.

[Alberta's Child]

My company's lease on its Manhattan office space is up for renewal next year. The management is talking about reducing the size of that office as a cost-cutting measure. I suggested they could keep the same office and negotiate a new lease at a 30% lower rate. They're so used to dealing with escalating lease rates that they considered my suggestion as if I were speaking a foreign language.

Time will tell, I guess.

[encm(ss)]

I live in Sugar Land Texas. Because of the Mall in SL is so full all the time, I counted the stores empty. One empty store in the mall. One store is moving in. Twenty-three stores are “outside” of the mall. 39 Kiosks are occupied and 7 are Empty. The mall is owned and managed by General Growth Properties (GGP) and they are (bankrupt?) or on the verge of bankruptcy because they can not get any bank loans to support their growth. It’s hard to believe that the banks can’t loan this company money.

[wizr]

Watch out! You may be inviting moooooore of us Kalifornians.

[GeronL]

As long as they don’t mind living in empty offices

[Domangart]

The problem is they have one mall full and one other is empty. Don't fool yourself about that full mall. Their sales are most likely off 50%. A friend of mine was working the books for this person who owned several buildings that were full. He unloaded them for 12M . They now stand empty. All those people out of work and the landlord has no cash flow.

[WKUHilltopper]

This is all by design...to “punish” the US for being mean and profitable. To de-industrialize the USA, to turn us into a banana republic and enslaved by Marxism. This shouldn’t be a surprise to those of us who’ve awakened.

[colorcountry]

I’m negotiating a lease as we speak. It’s funny but landlords around Salt Lake City don’t seem to think they need to negotiate. We’ll see.

[parsifal]

You are probably right. It isn’t unions and regulations, it’s $500 per month or less versus $500 per week wages.

parsy, who thinks we are in for a big change the next few years

[ExtremeUnction]

As long as they don’t mind living in empty offices.

So how does an investor make $$ from the commercial real estate crash? Where do I invest to be a winner when everthing has collapsed then repurchased at 1/2 the old value?

[GeronL]

Someone might be able to redevelopment the tall empty buildings into NYC type apartments and mortgage them to those fleeing the taxation and failed economies of LA, Chicago and NYC. Those crazies like tall buildings instead of trees.

[george76]

You could show them this loss of 70 percent of value and many empty lots ?

A Guided Tour Of NYC Commercial Real Estate Wreckage

http://www.businessinsider.com/a-guided-tour-of-nyc-commercial-real-estate-wreckage-video-2009-10

[george76]

SLC must have many landlords willing to negotiate even if some landlords are SOS.

[Ron/GA]

So how does an investor make $$ from the commercial real estate crash? Where do I invest to be a winner when everything has collapsed then repurchased at 1/2 the old value?

When you figure it out, let me know.

I am trying to buy an office/warehouse that was valued at $2m in 2006, then shot up to $3.4m by the beginning of 2008. Everything I hear and read says that values are down a minimum of 25% and more likely 40%.

My problem is the current owner does not believe (or does not want to admit) that his value has decreased at all and I can't afford to wait for reality to catch up with him.

I'm hearing that if I tried traditional financing and bring in a current appraisal that is not at least 25% under any previous valuation, they will not even look at the deal.

I guess I'll take money that is earning a lousy 2% and just go ahead and build a new one. It's medical office space and is about the only type of property holding value now.

In this environment, I'm not sure that I can count on ending up with a value at least equal to the cost of building it. With private money and positive cashflow, I'm not sure it matters.

When all of the S&L's went under back in the early 90's, I had a $4m building under construction and the government shut down my permanent lender. That was really tough. No one was lending money then either. Ah, we seem to have returned to the good old days!

[Gene Eric]

>> It’s hard to believe that the banks can’t loan this company money.

Not only are the banks holding onto the cash, the payables are running very, very late. The cash is being held because of credit risk.

[WOSG]

“The cure is tariffs”

That’s about as good a cure as bloodletting for a cold. That ‘cure’ gave us the great depression.

the real cure is pro-growth economic policies. We have about 6 million fewer private sector jobs than at the peak. We need to create those jobs. Govt handouts wont make it happen.

[FastCoyote]

I do commercial RE in Vegas. We have great deals we can’t move at any price. But I also have sellers too that just can’t believe the bottom really has fallen out.

I’d keep looking if I were you and find something to renovate rather than build from scratch. We have a client who may do that with some warehouse space to restaurant. Great TIs, get the landlord to pay for the renovation.