Financial and economic experts are predicting that foreclosures of commercial properties could rise this year in Florida and around the country. Commercial properties have fared somewhat decently during the real estate market crash, but that could begin to change as loans become due this year or soon after. Commercial real estate loans have terms of five to seven years, and many loans for commercial properties will be coming due soon, which could result in a rise in foreclosures.
According to a recent piece in the Herald-Tribune, a Congressional Oversight Panel made up of economic experts and former regulators reviewed the situation at the beginning of last year. The panel noted that $1.4 trillion in loans for commercial properties would be coming due in the upcoming four years. Because of the market crash, more than half of these loans are twice the value of the commercial property's current value.
When these loans come due it is possible that property owners will not be able to get refinancing because of the large difference between the loan value and the current property value. Currently, according to the Herald-Tribune, there is 2 million square feet of vacant commercial space in Sarasota and Manatee counties and this trend could continue to grow. In Sarasota County, larger apartment buildings have mostly avoided foreclosure, but foreclosures on smaller apartment buildings with fewer than 10 residences have been on the rise.
According to the Herald-Tribune, some property owners are leasing space at levels that do not cover their loan payments. Banks may foreclosure on owners for doing this if they do not pay the lenders the difference or "write a check" to lower the principal.
Commercial properties largely ducking wave of foreclosures (Herald-Tribune)
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