BluegrassForeclosure.com

From Cincinnati.com:  “Office vacancy grew to 20.2 percent by the end of 2009, rising most sharply in Tri-County, Northern Kentucky and on the west side of Cincinnati.”

Certainly a side-effect of unemployment.  With less people working and companies expecting the remaining workers to do more with less, companies are scaling back any way they can, including downsizing their office space.

Offices are only being hit, but retailers and industrial space as well.

“Retailers continue to file bankruptcy and flee their space in once bustling retail centers. But vacancies have given some retailers opportunities to rent cheaply or redevelop old retail centers, said Sean Wall, a Colliers broker.

Industrial vacancy may be the biggest concern for the local market. It has reached its highest point in 15 years at 10.2 percent.”

It’s a buyer’s market out there.  The same can be said about commercial space, it’s a tenant’s market.

“Landlords are willing to negotiate lower rent, operating costs or tenant improvements to keep tenants for longer terms, bring stability to their properties and prevent foreclosure.

Still, foreclosure rates are expected to rise again in 2010 as banks remain stringent, property values decrease and loan terms come due.”

I don’t foresee banks being willing to untighten their already tight restrictions on business lending in the first 6 months of 2010.  Even if restrictions are relaxed, banks are not loaning anything unless a business has some liquid cash.  I don’t know very many businesses with any liquid cash for expansion or anything.  Most that I have heard from are simply trying to keep their heads above water.

How is your business or industry doing?  Leave a comment.

RealtyTimes.com has an interesting report on the commercial property bubble as well.  As many of you are aware, the commercial market lags behind the residential market.  At the height of the residential lending bubble, commercial properties saw a bubble begin.

“Towards the end of the residential real estate boom, the commercial real estate market also saw a boom itself. Fueled by easy credit and new investors entering the market the commercial real estate market exploded.

Thousands of these properties were purchased at the height of the market and were highly leveraged. These properties may have performed well enough to cover debt service and operating costs when occupancy rates were at historic highs, but now that businesses are tightening their belts, unemployment is rising, consumers are not spending money on goods and services or traveling the pressure is mounting on commercial property owners. This scenario has left these commercial owners in an extremely precarious situation. If the poor economy doesn’t push these owners to a breaking point, the lender that holds the mortgage on the property will.”

We’ll have to sit and watch what happens.  Since the recovery, what little we’ve had so far, has been without many new jobs, it is unlikely that the commercial property economy is going to bounce back any time soon.  I doubt businesses loosen the purse strings any more than they have til now.  Banks are not going to be lending much money either.  This certainly makes for a perfect storm for the commercial market as well.

What are your thoughts?

The Courier-Journal has an interesting article on investment that are worth taking a second look at, including commercial real estate.

“Commercial real estate — which is now experiencing trouble similar to the housing market — might be a good investment opportunity, [Josh] Gilliam said.

“In that situation, you don’t have distressed properties so much as you have distressed owners,” he said.

People who don’t have millions of dollars to buy property outright can buy into real estate investment trusts — securities that trade on stock markets, he said.

But [John] Roberts said retail bankruptcies and an oversupply of property also means there is “a lot of risk” in commercial real estate.”

In the same article was this little nugget: “the federal government has been buying mortgage-backed securities, pushing interest rates down. In the spring, the rate on a 30-year, fixed-rate mortgage dipped below 5 percent for the first time in Freddie Mac’s Primary Mortgage Market Survey, which goes back to 1971. The rate was 4.78 percent last week.  . . .

. . . “Now is a great time to purchase,” said Adam Hall, a loan officer with Fifth Third Bank and secretary-treasurer of the Mortgage Bankers Association of Kentucky. “Buyers have lots of options.”The low rates have also caused a surge in mortgage refinancing, which makes sense if the homeowner plans to keep the property at least three to five years — long enough to recoup the closing costs associated with getting a new loan at a better interest rate, he said.”

Finally, it looks like the percentages of loans going into default is up as well.  Signs again, that the unemployment rate continues to drive default rates.

As pointed out in Business Lexington, even the commercial real estate market is feeling the pinch.

“The national commercial real estate market bubble has been deflating steadily for almost three years with values down approximately 40 percent from 2007 highs.

While even in a continuing bearish economy, Lexington is experiencing more development activity than many, if not most, other mid-sized to major American cities, the Bluegrass is not immune to worrisome market forces in commercial real estate.”

And even commercial loans go into default.  “On the national scene, many borrowers have already been struggling to meet monthly payments. According to Trepp, the New York-based provider of Commercial Mortgage-Backed Securities (CMBS) and commercial real estate information, analytics and technology, the delinquency rate of securitized commercial real estate loans hit 4.8 percent in October, dwarfing the 0.77 rate a year earlier.”

The entire article is definitely worth the read.

Sometimes so much time and resources are spent on residential foreclosures that we forget there is a commercial side as well.  Look around any community and review what kind and how much commercial property is available for lease.  There is a glut of commercial property available.

Just as residential property goes into foreclosure, so can commercial.  This includes rentals, duplexes, triplexes, fourplexes, retail centers, office buildings, gas stations, and anything else you can think of.  Business owners are struggling to make rent payments as well as mortgage payments.  Often the bank will work with a business owner if they can.  However, these properties go into foreclosure as well.

Sometimes these can even be better investment opportunities for the investor for several reasons.

1.  It is already zoned commercial, so you don’t have to go in front of planning and zoning to fight it out with them.

2.  Businesses are often found in prime locations, along main thoroughfares, in downtown business districts and such.

3.  You may have an instant tenant by lease/renting it back to the business owner at more favorable terms.

4.  You could be eligible for tax breaks from local municipalities as local governments want businesses to thrive and pay taxes.

Don’t overlook these valuable options.  It may be worth a second look.  For more assistance, click here.