Commercial Real Estate Lurks as Next Potential Mortgage Crisis

08-31-2009 • WSJ

Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat. Their efforts could be undermined by a surge in foreclosures of commercial property carrying mortgages that were packaged and sold by Wall Street as bonds. The CMBS sector is suffering two kinds of pain, which, according to credit rater Realpoint LLC, sent its delinquency rate to 3.14% in July, more than six times the level a year earlier. One is simply the result of bad underwriting. In the era of looser credit, The commercial-real-estate market could yet be salvaged by an improving economy and bailout programs coming out of Washington. In addition, capital markets are starting to ease for publicly traded real-estate investment trusts. Since March, more than two dozen REITs have managed to raise more than $13 billion by selling shares. Still, most of the $6.7 trillion in commercial

2 Comments in Response to Commercial Real Estate Lurks as Next Potential Mortgage Crisis

Comment by Paul The cab driver

Entered on: 9/1/2009 5:19:18 AM

As I drive the cab around every day in Phoenix, I am amazed at the number of vacancies in strip-malls, and office complexes. And while several Phoenix area malls are still doing well (Paradise Valley Mall, Arrowhead Mall), others are falling on very hard times (Metro Center) As these commercial vacancies rise, the pressure increases on property owners, which in turn, puts pressure on commercial mortgage holders. this commercial property situation looks very very bad.

Comment by Lucky Red

Entered on: 9/1/2009 5:04:42 AM

Oh, that's not a problem and nobody should lose sleep over this one. Now that we've got a whooping 4 bill back from the alleged 800 bill we gave to the banks, we're in a position to start bailing out other rich yet less fortunate people who need it such as big real estate developers. Yeah, Donald Trump!

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