North Texas commercial foreclosure filings have increased by more than 60 percent so far this year. Since January nearly 1400 commercial property foreclosure filings have been posted in the Dallas-Fort Worth area alone-compare that to last year's 900 commercial real estate foreclosure filings in the same period. When the commercial real estate foreclosure crisis first hit, it initially impacted mostly shopping centers; but now many more apartment buildings and office buildings are being impacted by foreclosure. Foreclosure filings for apartment buildings rose by 44 percent this year and foreclosure filings for offices has increased by 21 percent compared to last year. And many analysts predict that the commercial real estate foreclosure crisis will only worsen and may last at least until 2012.
Some of the core causes of the commercial real estate foreclosure crisis are business reduction in revenue and tough lending standards. With so many Americans unemployed or underemployed, businesses are experiencing a sharp decrease in sales revenue. The first to feel the impact of high unemployment were retail stores, this is why we initially saw the sharp rise in shopping mall foreclosures a year ago. But many shopping centers tackled their foreclosure debacle using bankruptcy and reduced their costs by closing stores and reducing their workforce. That action alone has had a direct impact on the office space rental market. The corporate offices of those companies who closed their stores and reduced their workforce are now shrinking and the same goes for any businesses that depended on the retail industry and/or who have been directed impacted by reduced customer spending. Simply put, companies aren't expanding they are shrinking which means that not only are they not leasing more office space they are even consolidating their office space and failing to renew leases. The same is true for apartment buildings. The residential foreclosure crisis is not necessarily translating to more renters; but in many cases more people doubling up in already rented units. Plus with so many foreclosures on the market, many owners are looking to rent out their properties instead of attempting to sell. If we continue at the pace we are going, we could see foreclosure levels reach 1980's proportions in less than two years. The only way to avoid this is to get serious about forcing mortgage companies to tackle not both residential and commercial foreclosures in a very aggressive manner.