I posted this a few months back and it is still anecdotal but in the Houston metroplex I have noticed a significant amount of commercial for lease signs and it seems to be increasing with time. That is concerning because commercial real estate is often built on credit (mortgages) then the tenant’s payments go to pay the loans. When occupancy goes down, the ability to pay that loan goes down until its unsustainable and it goes into default.
If you default on you home loan of say $300,000, its your problem and the bank has recourse and gets your asset. When a commercial loan of $5,000,000 defaults and no one was renting it already, the bank gets the asset but it’s not “worth” anything other than the building/land and it is harder for the bank to recoup that value.
When that happens en-masse, that’s a problem for the bank… Which makes it a problem for the economy, and it becomes a problem for all of us. This has been going on for a while and no one is doing anything about it. The cliff looks to be approaching.
I’ve noticed the same. But weirdly they are also building more industrial buildings, just in different areas. I assume because it’s cheaper to build a new building than to deal with an old 40 year old one.
It’s going to be a global quagmire. France is basically underwater and the EU probably isn’t strong enough to bail them out. China still has property finance problems, even if they did a good job keeping it out of the news.
I posted this a few months back and it is still anecdotal but in the Houston metroplex I have noticed a significant amount of commercial for lease signs and it seems to be increasing with time. That is concerning because commercial real estate is often built on credit (mortgages) then the tenant’s payments go to pay the loans. When occupancy goes down, the ability to pay that loan goes down until its unsustainable and it goes into default.
If you default on you home loan of say $300,000, its your problem and the bank has recourse and gets your asset. When a commercial loan of $5,000,000 defaults and no one was renting it already, the bank gets the asset but it’s not “worth” anything other than the building/land and it is harder for the bank to recoup that value.
When that happens en-masse, that’s a problem for the bank… Which makes it a problem for the economy, and it becomes a problem for all of us. This has been going on for a while and no one is doing anything about it. The cliff looks to be approaching.
I’ve noticed the same. But weirdly they are also building more industrial buildings, just in different areas. I assume because it’s cheaper to build a new building than to deal with an old 40 year old one.
It’s going to be a global quagmire. France is basically underwater and the EU probably isn’t strong enough to bail them out. China still has property finance problems, even if they did a good job keeping it out of the news.