It seems everyone’s on the wagon for this one. From the PBS’s NewsHour to the WSJ, there are reports and news tidbits about commercial property ventures on the verge of collapse.
I just saw this little bit on the WSJ about a large apartment complex in NY that has a year of money left to pay a huge debt that was used to finance its purchase not too long ago. Just this time around it’s less about bad loans and more about bad forecasts and judgment in general.
This quote from the NewsHour piece says it all: “the market was full of such optimism that rents would keep increasing and office buildings would stay fully leased.” Of course, because all markets go up all the time…
Granted the deal was done in early 2007 so everyone was on the same bandwagon seeing dollar signs and thinking the economy would keep going up. But, at the same time, you had others already looking at the overinflated residential market with worry. I can’t remember the guy but Jon Stewart interviewed someone who was quoted (there was a video so we’ve got proof!) as saying the market is going to tank. Meanwhile, the guy interviewing him scoffed at the idea. Great job.
The big problem with commercial real estate is the relative size of the transactions. There may be fewer buildings versus single-family homes out there but your typical home doesn’t sell for a hundred million dollars.
Time will tell of course but I’d hate to see another dip in the emotional economy–dictated by fears and whims–bring the current progress, however shaky, crashing down.
kn
