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Buying commercial real estate in today’s market

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Over the recent months, we have heard a lot of talk about the Real Estate Market and lending market. Although there has been a lot of talk about how people are losing their current homes, or unable to qualify for loans to purchase a home of their choice. We have no heard a lot of talk about the Commercial Real Estate side of things. The reality of it is, investors are taking a beating in this market as well.

With the issue arising with sub prime loans, and the crash of the mortgage market not only are families and individuals suffering, investors are seeing that business is taking a turn for the worse. For many investors, investing in commercial property is how they make a living. The cold hard truth is, these lenders who cannot fund individuals, cannot find the investors either. Simply because the have NO money to lend. They don’t have money to lend to the builders to start and even in some cases finish their new projects, leaving less of an inventory to the investor. The banks don’t have the money to lend the investor to purchase property that is already out there on the market.

This current downfall has also caused hardship for those investors who currently own buildings, especially apartment buildings. Office spaces are becoming vacant more frequently, with more and more businesses being forced to close. Apartment owners are really suffering. A lot of the tenants that are renting from them, are becoming unemployed, and in turn not able to pay their rent. Prospective tenants are turning away because they simply cannot afford the asking price of the rent. This often leaves the landlord having to lower the rent price, far below market value simply so they do not have a unit just sitting empty for weeks and in most cases months.

 

Just like with any downfall in an industry, this has caused a chain reaction. Investors are hurting, as well as builders and contractors. Experts on the subject have said this is the biggest downturn in commercial real estate since the early 90’s.

The construction business is taking a bad fall also. People who work in this industry, are losing their jobs at rapid rates, because there just isn’t any work to be done. Investors are losing a lot of confidence in this, because they are not seeing a light at the end of the tunnel. They is no inventory to purchase, causing them to simply give up on looking. Investors work smart and know if a property is going to be a good enough investment of their time and money. There just isn’t anything out there that seems to be worth anything to these investors.

This is said to also cause a stress on the lenders, because in some cases they are being forced to extend current loans, so that they don’t go unpaid causing the loan to go into default, in turn causing the banks to lose even more money.

This current problem isn’t looking to get better anytime soon, unless the economy itself miraculously turns around for the better.

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