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Comments and thoughts on this article? Is this any surprise or will it hit us from left field and ripple effect through the global economy like the last meltdown?*************
Vancouver Province - May 1, 2009.
WASHINGTON — Two years after fissures in the U.S. residential housing market gave way to a national collapse of home prices and sales, experts warn the next shoe to drop is the commercial real-estate market, bringing more woes to the battered economy.
Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching a renewal date. By some estimates, two out of every three will no longer meet the original loan conditions and won`t be able to refinance. And with prices for commercial properties expected to plunge, a vicious cycle may unfold much as it has in the U.S. housing market.
"It`s the next wave to hit. It`s the next round of bad news," said Scott Talbott, senior vice-president of government affairs for the Financial Services Roundtable, a trade group for big banks and other financial institutions who are collectively concerned about the coming problems.
A commercial-mortgage meltdown is likely to prolong the U.S. economic recovery. The falling prices in commercial real estate will lead to additional bank losses at a time when banks are sapped by home-mortgage defaults and soaring credit-card defaults. This could lead to future additional taxpayer assistance for the banks.
The reality is already on display. On April 16, the U.S.`s second-largest mall developer, General Growth Properties, filed for bankruptcy protection. The Chicago-based company owns more than 200 malls across the U.S., and was unable to renegotiate its debts as they came due.
Six days later, a 40-storey office tower on New York`s Avenue of the Americas was seized by its creditor, a Canadian-owned pension fund. The tower`s owner, Macklowe Properties, couldn`t meet loan terms.
"On the street, the rumour is it is coming and it`s going to come fast and furious. Some people are predicting September," said Paul Waters, a New York based executive vice-president of brokerage operations in North America for NAI Global, a top-five commercial real estate brokerage with operations across the globe.
Vancouver Province - May 1, 2009.
WASHINGTON — Two years after fissures in the U.S. residential housing market gave way to a national collapse of home prices and sales, experts warn the next shoe to drop is the commercial real-estate market, bringing more woes to the battered economy.
Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching a renewal date. By some estimates, two out of every three will no longer meet the original loan conditions and won`t be able to refinance. And with prices for commercial properties expected to plunge, a vicious cycle may unfold much as it has in the U.S. housing market.
"It`s the next wave to hit. It`s the next round of bad news," said Scott Talbott, senior vice-president of government affairs for the Financial Services Roundtable, a trade group for big banks and other financial institutions who are collectively concerned about the coming problems.
A commercial-mortgage meltdown is likely to prolong the U.S. economic recovery. The falling prices in commercial real estate will lead to additional bank losses at a time when banks are sapped by home-mortgage defaults and soaring credit-card defaults. This could lead to future additional taxpayer assistance for the banks.
The reality is already on display. On April 16, the U.S.`s second-largest mall developer, General Growth Properties, filed for bankruptcy protection. The Chicago-based company owns more than 200 malls across the U.S., and was unable to renegotiate its debts as they came due.
Six days later, a 40-storey office tower on New York`s Avenue of the Americas was seized by its creditor, a Canadian-owned pension fund. The tower`s owner, Macklowe Properties, couldn`t meet loan terms.
"On the street, the rumour is it is coming and it`s going to come fast and furious. Some people are predicting September," said Paul Waters, a New York based executive vice-president of brokerage operations in North America for NAI Global, a top-five commercial real estate brokerage with operations across the globe.