Once Bitten, Twice Shy: Commercial Real Estate’s Slow Slog to Recovery
The various players in the CRE industry are in a stalemate of sorts. Not enough buyers for CRE assets currently exist, especially if one excludes so-called vulture investors. The lending community is delaying foreclosure procedures and sales of real estate-owned properties as a result of depressed values. These factors foster an environment of stagnation in the CRE industry, and companies may be tempted to limp along and simply survive. However, the CRE industry is about to face a post-recession paradigm it has never seen before. The recovery following the 2001 recession is not a good benchmark because access to capital may be much more severely constrained. Approximately $1.4 trillion in CRE loans will mature during the next four years. The lending market will probably be flooded with demand, while higher loan-to-value ratios, tighter credit standards and an uncertain securitization market may limit refi nancing opportunities.
Link to Grant Thorton White Paper