• 05
  • March
    2011

According to a recent analysis by the commercial real estate industry observer CoStar, the outlook for distressed commercial real estate properties is improving, which means more distressed commercial properties may come on the market in 2011. CoStar surveyed commercial real estate professionals across the country for their perspectives on the future of distressed commercial properties.

The industry professionals cite several factors that are contributing to a rosier picture for commercial property investors and lenders. First, many perceive that market conditions for commercial real estate have bottomed out. If current conditions are truly at the bottom of the market, then the industry experts predict an increase in commercial real estate sales and an increase in values. Second, lenders' attitudes toward foreclosures and loan workouts are starting to change.

According to CoStar, lenders have avoided foreclosing on many properties because of the huge losses they faced as commercial real estate values tumbled during the Great Recession. This has been referred to as "extend and pretend" as lenders closed their eyes to missed loan payments rather than face steeper losses by foreclosing on the property and selling at the bottom of the market or not being able to sell the property at all.

Now, the commericial real estate market is loosening up as lenders are more willing to sell off distressed properties, and commercial investors are more willing to buy them.

A Georgia REO professional predicts that multi-family, retail, industrial and office spaces will see an uptick in sales, although he cautions that commercial property sales in suburban Atlanta will continue to languish.

Source: CoStar.com, "For Distressed Investors, There is No Where To Go But Up," Mark Heschmeyer, 3/02/2011