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Commercial Real Estate Collapse Inevitable

Posted on | March 31, 2009 | 5 Comments


commercial-real-estateThe day after Christmas last year, I wrote the article “If You Think Mortgage Rates Are Low Now; Wait Until You Read This.“  The main point of the article was to illustrate the coming commerical real estate collapse that is inevitable.  Back in December I predicted that retail sales for Christmas would be horrible; we are slowly starting to see those numbers trickle in.  Many retailers are struggling mightly to keep their business models profitable.

Over the last three months, the unemployment rate has continued to climb.  If Christmas sales were down, imagine what Valentine’s Day and Easter retail sales are going to look like.  Many retailers that are paying a premium for ideal real estate locations are not going to be able to fulfill the financial commitments they made.  Only the strong retailers will survive as we have seen Rite-Aid, Sears and RadioShack as report financial numbers that would hint they are going to cease to exist in the near future if the economy continues to struggle.

All those Rite-Aid stores on premier corners will be empty builders; the RadioShacks and Sears in every shopping mall will be empty.  The cost of the real estate alone will cause many retailers to adjust their business models.  We will no longer see companies renting space solely for the advertising.  It is likely you have been in a mall or shopping center recently and have noticed the amount of empty spaces and closed stores.  This is just the beginning; it is going to get much worse.

To compound matters, commercial office space is going to become abandoned as well.  Many corporations are downsizing and asking individuals to work from home as they do not want to incur the costs of renting office space.  Cutting the cost of office space could save some companies millions of dollars, so it is likely that this is going to happen sooner than later.  All those office buildings that were erected during the last three years are going unrented because the business of America has changed.

It is quite unfortunate, but the commercial real estate collapse is inevitable. If you do not think this is a strong possibility, just look at the stock chart of CB Richard Ellis.  A steady 80% decline of the last year pretty much paints the picture.

CB Richard Ellis offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate assets globally under the CB Richard Ellis brand name

This is an industry I would want no part of right now as things are going to get even worse!

Make sure to vote on how you feel about Obama on the Dollar at www.obamaonthedollar.com.  Can you believe people are actually pushing this already?

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Comments

5 Responses to “Commercial Real Estate Collapse Inevitable”

  1. Is Commercial Real Estate Next? - Mortgage Rate News
    March 31st, 2009 @ 2:39 pm

    [...] on telecommuting, it is no surprise that office space is no longer as necessary as it once was. Subprime Blogger reports on this shift in corporate practice: To compound matters, commercial office space is going to become abandoned as well.  Many [...]

  2. The Financial Suite » Mortgage Rate Predictions - Rates Drop to 4.82%
    May 22nd, 2009 @ 10:25 pm

    [...] Just because average mortgage rates are low, it does not mean that refinancing and buying a new home will come easy.  The old adage that I always use is that if “everyone” and their brother are doing it, it is likely not the best decision for a smart investor.  If everyone and their brother think that mortgage rates are going to cause the housing market to bottom, it is VERY likely that we will see another downward movement in home prices; this time it will likely be because of the commercial real estate collapse. [...]

  3. Subprime Blogger / Mortgage Rate Predictions - Rates Drop to 4.82%
    May 31st, 2009 @ 6:22 pm

    [...] Just because average mortgage rates are low, it does not mean that refinancing and buying a new home will come easy.  The old adage that I always use is that if “everyone” and their brother are doing it, it is likely not the best decision for a smart investor.  If everyone and their brother think that mortgage rates are going to cause the housing market to bottom, it is VERY likely that we will see another downward movement in home prices; this time it will likely be because of the commercial real estate collapse. [...]

  4. Mortgage Rate Predictions – Rates Drop to 4.82%
    July 2nd, 2009 @ 3:23 pm

    [...] Just because average mortgage rates are low, it does not mean that refinancing and buying a new home will come easy.  The old adage that I always use is that if “everyone” and their brother are doing it, it is likely not the best decision for a smart investor.  If everyone and their brother think that mortgage rates are going to cause the housing market to bottom, it is VERY likely that we will see another downward movement in home prices; this time it will likely be because of the commercial real estate collapse. [...]

  5. Anny@ Online Lottery
    July 28th, 2009 @ 5:21 am

    Real estate ones was a great business but at this rapid moment of falling down of strongest economy created a great instance for the real estate investor became a serious matter like playing online lottery without Lottery Guides .Because going to cause the housing market to bottom, it is VERY likely that we will see another downward movement in home prices; this time it will likely be because of the commercial real estate collapse.

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