Editor’s Note: This will mirror the residential real estate asset decline situation in the United States, commercial real usually has a lagging effect that mirrors the demand for homes so that more demand will produce lenders that will lend on commerical real estate projects. With the business climate in a recession / depression, it is no surprise to see defaults increase in this sector.
News:
If you want to know what’s going to happen to commercial real estate across the U.S., look no further than Cleveland and Detroit.
Those two metropolitan areas lead the U.S. in mortgage delinquencies for owners of office buildings, apartments, malls and warehouses, a sign that cities hurt by the housing crisis will see their commercial markets dragged down next.
Commercial properties with mortgage payments 60 days late or more rose to 3.93 percent as of March in the Cleveland area and to 3.75 percent in the Detroit area, according to data compiled by Bloomberg. The North American commercial property delinquency rate is 1.1 percent, according to Standard & Poor’s.
Once-booming housing markets such as Phoenix and Las Vegas are likely next at risk, said Robert Bach, chief economist at Santa Ana, California-based broker Grubb & Ellis Co. The slump in housing and rising unemployment will probably take a toll on retail and office landlords, Bach said. The second year of the recession is cutting demand for commercial real estate after prices hit a record in 2007.
“There is really no part of the country being spared,” said Bach. “Cleveland and Detroit are just the first to feel the stress. They’re the canaries in the coal mine.”
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