That big whoosh you're hearing is the air rushing out of a
commercial real estate bubble.
More than two years into the worst housing crisis in decades,
commercial real estate is shaping up as the second half of
what some are calling a “double bubble.” Owners of shopping
malls, hotels, office space and apartment buildings — and the
bankers who financed them — face a major crunch over the
next two years as the mortgages on those properties start
coming due.
Much like homeowners who now owe more on their mortgage
than their house is worth, many commercial property owners
have seen the value of their properties plummet, increasing the
risk of default on hundreds of billions in commercial real estate
loans.
That is expected to put more stress on thousands of banks that
have already been deemed “not too big to fail.”
“I have never seen anything this bad,” said Dan Tishman, CEO
of Tishman Construction, one of the nation's leading construction
and management firms, comparing the current slide to major
commercial real estate busts in the 1980s and '90s.
Even as economists and federal officials point to recent signs
that the recession may be ending, there’s widespread concern
that commercial real estate could pose a threat to the recovery.
Federal Reserve Chairman Ben Bernanke told members of the
House Financial Services Committee this month that "commercial
real estate remains a very serious problem."
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