Commercial real estate foreclosures may be poised to be a major Achilles heel for the financial recovery we all hope to see. Many commercial real estate properties are losing serious value and tenants causing a jittery reaction of commercial real estate lenders. It’s becoming a common headline to hear about some “poor” real estate developer who lost his/her shirt because a loan became due and no commercial lenders were willing to extend a helping hand in the form of a new loan. Those “poor” real estate developers often find themselves swimming in foreclosure filings and being forced into bankruptcy because of it.
Dallas-Fort Worth has seen its share of commercial real estate foreclosures and we may see many more. The problem is that much of Dallas-Fort Worth may be too over-developed for the current economy as is most of the country. With this over-development comes falling prices, low vacancy rates, reluctant lenders and an abundance of foreclosures. Many commercial real estate developers who file bankruptcy may be able to survive if they can negotiate a win-win solution with their creditors and somehow increase their revenue. What we have seen is a slew of commercial real estate bankruptcy filings which end with investors taking over property, renting it out and/or finding a buyer even if they need to look abroad. How does this impact the ordinary Citizen Joe and Jane? Well, real estate has been the driving force behind the economic boom we experienced; but now that this industry is experiencing a major contraction we could see even more job losses-or what I like to call “silent” job losses. Many of those working in the real estate industry were not “regular” employees who have access to unemployment insurance. For example, real estate agents and even some loan brokers don’t work as employees, but as independent contractors who do not have access to unemployment insurance. So when we hear about how many jobs have been lost and unemployment rate, we are not counting many who work in the real estate industry. And many more workers who work in the commercial real estate industry may struggle financially has the industry faces mounting foreclosures.