Banks worry about commercial property

WASHINGTON – July 6, 2009 – The next big drag on the economy could come from about $1.7 trillion in commercial property loans held by banks for U.S. office buildings, shopping centers and other income-generating properties. A recent Deutsche Bank study warns that tougher underwriting standards and a projected 50-percent plunge in property values would prevent many commercial borrowers from refinancing their loans as they come due over the next four years.

Some buildings are worth less than their outstanding loan balances; in other cases, lenders are requiring landlords to come up with more cash upfront in order to obtain refinancing.

Real Estate Econometrics calculates that the share of bank-held commercial real estate mortgages that are 90 or more days past due increased to 2.25 percent in this year’s January-through-March period, an increase of almost 45 basis points over the previous quarter.

© Copyright 2009 INFORMATION, INC. Bethesda, MD (301) 215-4688

Source: Investor’s Business Daily (07/06/09) P. A6; Gose, Joe

Questions, comments or suggestions on this article? Have a news tip? Send a letter to the editor to: Newseditor@floridarealtors.org.