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Commercial Property Meltdown coming next?

Melensdad

Melensdad

Jerk in a Hawaiian Shirt & SNOWCAT Moderator
Staff member
While housing has collapsed in many areas, and all property values have declined, does anyone see a real collapse coming in commercial property values?

I do. It strikes me that as businesses close shop, and as there are already many vacant, or nearly vacant strip malls and plazas dotting the landscape, it seems like commercial property is the next thing to fall.

And when commercial property falls, will the healthy banks that avoided the home mortgage meltdown then feel the pain of a commercial mortgage collapse?

Now supposing that the commercial market does fall, and I expect it will, what do you think the ramifications will be on our total economy? Honestly I do not think we are at the 'bottom' of this recession, I think we have yet to see the real bad stuff. I think we are in for a lot worse.
 
I know of one location where an entire shopping mall is sitting empty.
On another note, there is a retail area not too far from here that runs for miles and many of the businesses are closing. There are no new businesses that will take their place at those locations. At the rate vacant commercial real estate has popped up along this strip, I wonder how long before it becomes 30, 50, or even 80 percent vacant?
The strip mall area in the suburbs becomes the blighted downtown area of 35 years ago. :unsure:


Don't worry... the federal government will make it all better. :sad: When everyone runs out of money, we can just borrow more and pass it out again... the supply is infinite!

Yesterday's Chuck Norris column was a good one...

How does one fight an administration and Congress that believes "only government" is the answer? Is it really true that in the absence of government intervention and doling out another trillion dollars of debt that our nation would certainly experience an economic holocaust? Former President G. W. Bush pushed the first trillion dollar bailout upon America. Nothing happened. President Obama has now pushed the second trillion dollar bailout upon America. Why should we believe there won't be a third, fourth, fifth or sixth governmental so-called stimulus? What other recourse do they have?

We're in the trillions tank. And Congress' only solution is to print more money and make more loans. Congress is constantly telling the American people to spend, spend, spend and nothing about living within their means. The Senate tries to save every financial institution, rather than to allow the reasonable death of some under a diminishing supply and demand. Our presidents repeatedly try to jumpstart the last and highest revolution of the credit merry-go-round by refilling the gas tanks of financial companies for one more go-round. But why? To lend out to those who are already maxed out on monthly payments? Or is it the unemployed who are now supposed to borrow the big bucks? We must quit bailing out what we've borrowed. As George Washington said, "To contract new debts is not the way to pay for old ones."
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I rent commercial property for my business. Housing market which is my main business sucks and last week I got the new monthly rent payment for the next year. As taxes go up so does my rent. $2,500 per month increase or 30K. Can't afford it. I have a year and 7 months left on my lease. The last move I made by the time I changed all the electrical I needed and moved all the equipment shelves etc it cost me over 50K. But I have no choice but to look elsewhere. It sucks man.
 
Murph, I'd go to the landlord and ask for concessions. Tell him that you want a small rent cut because of the economy, he probably won't give you a cut, but you may be able to settle on a rent freeze, or a much smaller increase?
 
^^ agree - why would a landlord push a good tenant out, only to be stuck with an empty unit?

I've had my eye on a large pole building that was a stamping plant. Close to my place in Michigan. I'd use it for storing my summer toys during the winter, and maybe even picking up a few renters. But even if I didn't, I may do ok. The place is at about 1/2 price of what they were asking 18 months ago, and it is still empty, and other building empty close by. The place has heavy 480vac 3p, 240 vac 3p, and 220/110 vac. I am waiting to see where this all goes.
 
B_Skurka said:
Murph, I'd go to the landlord and ask for concessions. Tell him that you want a small rent cut because of the economy, he probably won't give you a cut, but you may be able to settle on a rent freeze, or a much smaller increase?
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Bob we already tried. He told me there is nothing he can do. The increase is taxes only and with all the upgrades he had to make this last year he has no choice but to at least pass on the property taxes to me. We are thinking and possibly going to work out a deal where I cut back on space. But I don't know if that is going to help him at all because he won't be able to rent out the space we don't have anyway. There is just too many empty buildings around in our area.


murph
 
thcri said:
My lease runs until November 2010 so he has me at least until then.
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Yes and no. Anything can be renegotiated. It is worth a try. If you can't pay he can't collect. You need to try to play that card. Besides, any smart landlord will want to keep a good tenant long term. Not just for 1 more year.
 
Real estate taxes are a major problem across the country. On one of my properties the taxes have doubled in the last five years. When the lease was renewed I was able to only recover about 40% of the increase in taxes, I had to eat the rest.
 
B_Skurka said:
Yes and no. Anything can be renegotiated. It is worth a try. If you can't pay he can't collect. You need to try to play that card. Besides, any smart landlord will want to keep a good tenant long term. Not just for 1 more year.
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You are right Bob and we will do our best. You thinking about a trip up north anytime soon :yum: Maybe I could hire you to negotiate. I think you said you come up to Menomonie Wisconsin every so often??? Good memory don't I??
 
Any chance you could go to your local tax assessor and persuade him that the value of the property has fallen in this market?
 
California said:
Any chance you could go to your local tax assessor and persuade him that the value of the property has fallen in this market?
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That is a possibility though it would be a long fight. I think the owner of the building if he cared should be doing that already. But the way I see it is they are not going to lower the taxes since the economy is the way it is. They have less money coming in.
 
No, they have to lower your taxes if you can prove the value is less than when they last appraised it and adjusted your taxes.

Property tax is per $ of value. They can't just change the mathematical rate that is applied to each thousand of appraisal value to improve their revenue. A Tax Rate Change, the mathematical rate per thousand, is community-wide and to raise that rate requires a vote by the county supervisors or something.

I would see how to appeal the present Assessor's appraisal.

Your landlord has no incentive to do this for you, if the lease says he can pass-through any tax increase to the tenant.
 
Had a buddy with the Rochester MN mall, kept having endless tax increases, finally hired a law fim that used the opening of the Mall of America which is a regional pull of retail dollars to document the drop in value of Rochester...

Their success rumbled statewide & when that same firm was hired by Rosedale Mall (twin cities). The first thing the local Assessor said was "How much you want?"
 
I do not think there is any doubt that commercial investment will suffer . I have seen it already in the Commercial real estate I own .If you want to keep them up and running you must be willing to freeze or reduce the lease as necessary . Its better to break even in hard times than go backwards on the bottom line .

Of course those invested in a Real Estate Trust have little option or say so in the day to day operations . They are only interested i one thing . The check . Thats why I tend to shy away from partnerships or investors as I like calling the shots . I answer to no one but myself .

Does that mean I always get it right ??? No it does not .

Its a rough road ahead folks . Tighten up those seat belts a little .
 
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