Commercial Real Estate Market In Serious Trouble, Say Experts

By Mariko Lamb, Talk Radio News Service

In a Joint Economic Committee hearing Thursday, Congress sounded the alarm on the ongoing financial problems in the commercial real estate market–problems that may lead to consequences similar to the housing market failure at the start of the economic recession.

Expert panelists Richard Parkus, head of Commercial Mortgage Backed Security, and Jeffrey DeBoer, president and CEO of The Real Estate Roundtable, told the committee that palpable improvements in the commercial real estate market will not likely be seen until the beginning of 2012.

“Typically, commercial real estate fundamentals begin to pick up 12-18 months after unemployment begins to pick up,” said Parkus, projecting that unemployment will pick up by mid-2010 at the earliest.

“The bottom line is this,” said DeBoer, “the current financial system in America simply can not meet the financing demands of the commercial real estate marketplace.”

Parkus noted, “In order to work through this extremely stressful process, it will be critically important that commercial real estate financing markets begin to function again with some degree of normalcy.”

One of the panel’s suggested fixes to this looming crisis included an extension of Term Asset-Backed Securities Loan Facility (TALF), a Federal Reserve credit facility that will support the issuance asset-backed securities (ABS) to assist in accommodating consumer and small business’ credit needs. Additional suggestions included not increasing taxes on real estate ownership and support of the Public-Private Investment Program (PPIP).