New Wave of Commercial Mortgage Foreclosures
Experts warn of a coming wave of commercial foreclosures
Your neighbor’s home has been foreclosed. Could your neighborhood shopping center be next?
Even as residential foreclosures seem to be ebbing, experts warn a new wave of foreclosures could be coming in the commercial property sector.
The same things that drove homeowners into foreclosure — declining property values and a lingering recession — are also threatening malls, office buildings and apartment complexes.
In Brevard County in 2008, 42 commercial properties worth $21.1 million were lost to foreclosure. That’s double the 21 properties worth $7.2 million that were foreclosed in 2007.
“There is a larger share of owners that simply don’t have the money to pay their mortgages,” said economist Sam Chandan, president of Real Estate Econometrics, a New York firm that tracks the commercial real estate market.
A recent report by the company said that the default rate on commercial loans nationwide rose from 1.62 percent in the fourth quarter of 2008 to 2.25 percent in the first quarter of 2009. That was the biggest quarterly jump since quarterly data became available in 2003, and the default rate was the highest in at least 15 years.
And the worst is yet to come, Chandan warns. He predicts the default rate will grow to 4.1 percent by the end of the year and continue to climb until peaking at 5.3 percent in the fourth quarter of 2011.
If those predictions are right, nearly $200 billion of the nearly $3.5 trillion in commercial properties nationwide could be in danger of being lost to foreclosure.
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