Lately, all the news has been focused on the residential housing foreclosures but there is another forclosure storm soon to hit the US markets. Commercial real estate values have fallen 30% – 40% since two years ago when they were at their height.  Since the economy as a whole has slowed, less people are starting businesses and already established business have stopped expanding or are even shutting down existing locations. This has led to a rise is vacancies in the commercial real estate markets and is also pushing down overall rents. Anchor tenants are leaving strip malls in droves which threaten the overall health of the other mall businesses.

Of the 3.5 trillion commercial mortgage backed securities, banks hold half of the debt. These loans are all backed by commercial property as collateral. According to Keefe Brunette & Woods, a New York based investment ban, “delinquency rates on commercial loans jumped from 4.4% to in the first quarter from 1.6% in the previous quarter” as reported in the May 31, 2009 issue of The Review Journal.

Currently, not a lot of press time is being given to this next wave of foreclosures. Perhaps the threat of “big money” or large corporations heading into foreclosure doesn’t make for as dramatic news coverage as Joe Average losing his family home. But this next wave of debt has the potential to affect the entire US economy as well as the local Las Vegas market. Even the experts don’t know what to expect, but be warned that it is coming to a real estate market close to you. Most likely it will result in further bank closures and tighter lending standards for both commercial and residential properties. A greater threat exists to the US economy as a whole as the residential housing foreclosure problems were in part to blame for the current economic recession.

 Most experts believe the economy is showing slow and gradual signs of improvement with a possible recovery by the last quarter of this year or early next year. I’m waiting to see how the market deals with this commercial real estate problem before I make up my own mind.