Commercial Real Estate Ticking Time Bomb

Commercial real estate may be the next blow to the economy. Owners must refinance or sell $165 billion in loans this year. Most of these loans had only 20-30% equity. Banks now require 40-50% equity.

Loan losses could reach $30 billion, pummeling smaller, community banks. They weren't as hard hit by the subprime mortgage mess as much as big banks, who could afford to play in the secondary market. The meltdown in small banks could be similar to the Savings and Loan Crisis 20 years ago.

What This Means for You

The bust in commercial real estate could extend the recession if commercial banks fail and strip mall owners go bankrupt. Why is the bust is only affecting commercial real estate now? It takes longer to build office and retail complexes.

You've probably already noticed the extent of "For Lease" signs in strip malls around you. Expect to see them increase, and stay that way for a long time. On the other hand, this presents a great opportunity for small businesses who are doing well to negotiate better lease terms. It could also be a good time to buy commercial real estate.

Related Articles

• Fed Bailout Like Savings and Loan Crisis
• How Real Estate Affects the Economy
• November 2006 Prediction - Real Estate Downturn Could Cause Recession

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