{"id":133,"date":"2009-12-06T14:16:06","date_gmt":"2009-12-06T21:16:06","guid":{"rendered":"http:\/\/privatemoneysource.com\/blog\/?p=133"},"modified":"2009-12-06T14:16:06","modified_gmt":"2009-12-06T21:16:06","slug":"commercial-real-estate-tsunami","status":"publish","type":"post","link":"https:\/\/privatemoneysource.com\/blog\/?p=133","title":{"rendered":"Commercial real estate tsunami?"},"content":{"rendered":"

Clay Sparkman<\/em><\/p>\n

There has been quite a bit of talk in 2009 about the possibility of a meltdown in the market for commercial real estate.\u00a0 I came across some statistics recently that were quite astounding in support of the idea that a wave of commercial defaults is coming.\u00a0 It is estimated, apparently, that there is currently 3 trillion in commercial real estate debt outstanding in the US.\u00a0 According to this particular source (which I\u2019m sorry to say I don\u2019t recall), 1.3 trillion of that debt will come due within the next four years.\u00a0 As we all know, there doesn\u2019t appear to be much in the way of new commercial funding available for those current loan holders (or their potential buyers), so the above statistics\u2014on the face of it–would tend to be worrisome.<\/p>\n

Still, 4 years is a long way out.\u00a0 I personally suspect that we will get a much better feel for what is likely to occur over the long haul by looking at what happens in 2010.\u00a0 But I am not a prognosticator.\u00a0 You\u2019d think that with a degree in economics, I might have the ability–or at least the inclination–to analyze and predict long-term economic trends.\u00a0 But I am not that kind of guy.\u00a0 I am more of a \u201csure it works in practice, but does in work in theory\u201d kind of guy.\u00a0 I like the type of economics where you look at what happened and then play with the numbers and try to figure out why it happened that way.\u00a0 Those familiar with Freakonomics<\/span> and SuperFreakonomics<\/span> by Levitt and Dubner will know what I am talking about.<\/p>\n

I recall my first day in a big lecture hall at University of Oregon attending Macroeconomics 101.\u00a0 I was a fresh faced kid eager to learn and ready to believe just about anything.\u00a0 When the professor said something like this:\u00a0 \u201cOkay the fundamental assumption that we will make as economists is that people are rational and that they will behave in a rational manner,\u201d it sounded fine to me at the time\u2014perfectly reasonable.\u00a0 I hadn\u2019t been around long enough to believe otherwise.\u00a0 It was only with the passing of years, after graduating from the university and going to work in the real world, that I began to question that assumption.\u00a0 And ultimately I concluded that it was downright ridiculous.\u00a0 My entire economics education was based on one fundamental and ridiculous idea.<\/em> It would be as though we had utilized a chicken bone as the foundation for building a skyscraper.\u00a0 (Needless to say, I was not happy when considering the amount of money I had spent obtaining this degree.)<\/p>\n

A very good read which speaks to the matter is Predictably Irrational<\/span>, by Dan Ariely.\u00a0 The bad news, if you wish to draw conclusions from this book, is indeed that individuals often engage in irrational behavior.\u00a0 However, the good news and the saving grace–I should think–if you are trying to understand human behavior in the aggregate, is that we are as it turns out quite predictable in our irrational behavior.<\/p>\n

Where was I then?\u00a0 Oh yes \u2026 my fundamental point is that I would rather not go too far down the road of attempting to predict the economic (or any other) future.\u00a0 I will only go so far as to say that I\u2019d rather it not happen.\u00a0 But it is worth pointing out that a downturn such as that discussed may not be all bad for those who invest and traffic in private money loans.\u00a0 If banks aren\u2019t lending as 1.3 trillion in loans come due and with private money lenders as the primary option, the pickings would be quite impressive indeed for those who choose to keep investing.<\/p>\n

So what do others have to say?\u00a0 As per usual, there are a wide range of opinions.\u00a0 And they tend to be somewhat polarized.\u00a0 I myself tend to think that the doomsday people somewhat undermine themselves by being so certain and unrelenting, but at the same time, I am suspicious of anyone who says that things are looking good.\u00a0 I figure the later must work the national association of realtors or some such thing.<\/p>\n

I guess we\u2019ll each have to decide for ourselves, and so here is a sampling of web content regarding the matter.<\/p>\n

From the Dallas Morning News<\/p>\n

http:\/\/www.dallasnews.com\/sharedcontent\/dws\/bus\/columnists\/chall\/stories\/DN-Hallcolumn_09bus.ART.State.Edition1.3cf46e6.html<\/a><\/p>\n

From the Business Insider<\/p>\n

http:\/\/www.businessinsider.com\/michael-panzner-commercial-real-estate-2009-11<\/a><\/p>\n

From the National Real Estate Investor<\/p>\n

http:\/\/nreionline.com\/property\/retail\/foreclosure_in_doubt\/<\/a><\/p>\n

From the Real Estate Channel<\/p>\n

http:\/\/www.realestatechannel.com\/us-markets\/commercial-real-estate-1\/national-association-of-realtors-lawrence-yun-nar-commercial-real-estate-index-commercial-real-estate-trends-2009-office-space-lease-office-space-sale-investment-1273.php<\/a><\/p>\n

From the Urban Land Institute<\/p>\n

http:\/\/www.uli.org\/ResearchAndPublications\/EmergingTrends\/Americas.aspx<\/a><\/p>\n

Okay, there is plenty more where that came from, but I won\u2019t burden you with it here; if you wish to read it, you\u2019ll have no trouble finding it.\u00a0 I would be very interested, however, in hearing the views of those who follow this site.\u00a0 We are still quite small in number, but we have enough folks to fill a good sized classroom now, so by all means, raise your hand and be heard.\u00a0 Please: prognosticate.<\/p>\n

— Clay (clay@privatemoneysource.com)<\/p>\n","protected":false},"excerpt":{"rendered":"

Clay Sparkman There has been quite a bit of talk in 2009 about the possibility of a meltdown in the market for commercial real estate.\u00a0 I came across some statistics recently that were quite astounding in support of the idea that a wave of commercial defaults is coming.\u00a0 It is estimated, apparently, that there is […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_s2mail":""},"categories":[7,21],"tags":[],"_links":{"self":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/133"}],"collection":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=133"}],"version-history":[{"count":0,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/133\/revisions"}],"wp:attachment":[{"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=133"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=133"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/privatemoneysource.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=133"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}