Commercial Real Estate in Big Trouble

Published by julia | Filed under Miscellaneous, Real Estate, Shout Outs, Uncategorized

Amidst the huge economic crisis in America, many people believe that big companies remain immune to the common struggles we are all facing. This, however, is simply not true. Some of the biggest names in commercial real estate are pounding at the door of the government in need of money just like the auto makers. The premise of the need is simple; the commercial real estate companies have $6 trillion in debt that will be coming due very soon and they do not have the money to make good on these investments.

The most immediate threat is $160 billion that is due next year. If the commercial owners of these properties do not make good on the monies due or find new loans to cover the amount they need to pay, these commercial investments will go into foreclosure or bankruptcy. This will be just another rung in the ladder to financial safety that will crumble under the feet big business.

Just like the everyday man, if these big businesses cannot qualify for a new loan, the money becomes due. The banks do not care whether that amount if $160,000 for a home or $160 billion for a piece of major commercial real estate. But, the people of the United States and other countries do care. If these businesses go under, there will be lost jobs to add to the 10 million people who are already out of work. With less money to be spent there will be less income and next year more commercial businesses will go under thus perpetuating the domino effect.

Some people close to the economic bailouts are claiming the only real these big businesses are coming to the government for money is because that is what everyone else is doing right now. Call it the herd mentality of finance. If one bailout is given and another huge sector of the population sees that bailout as the only way to stop the foreclosure or bankruptcy of their business, they will seek the same funding.

The commercial real estate businesses directly in need of money will have to face the government and convince them that there is no other way to stop the huge onslaught or lost jobs and economic crisis that will happen if these properties are shut down. With the huge dollars being considered for the automakers and other bailouts, convincing the government may be harder today that ever before.