Commercial Properties to Flood Bank Foreclosure Listing

by on Foreclosure Crisis

The Southern Nevada economy is still reeling from the devastating effects of the housing market collapse. The state still leads the nation in terms of foreclosure rates and industry analysts are not sure if the worst of the housing collapse is finally over.

But already, a big cloud is looming on the region again, threatening to wipeout whatever progress has been made towards its recovery. Commercial properties are expected to flood the bank foreclosure listing in Las Vegas and also other cities across the country.

Earlier this decade, commercial developers went on a spending spree, building left and right in an effort to take advantage of the booming real estate market and economy. And in order to fund their various development projects, they turned to banks for loans assuming that rental fees are enough to cover their monthly mortgage payments.

But as it turned out, companies downsize, retailers close underperforming stores and vacant warehouses grew in numbers each day. Retail and office vacancy rates soared to highest levels, leaving developers struggling to find ways to pay up their loans. Many of them find their properties worth less than what they owed for mortgage.

A recent market report showed that Las Vegas ranked behind New York in terms of distressed commercial properties. The report noted that troubled loans increased to $6.4 billion this year from $4.7 billion last year.

The figures indicated that about 26 percent of the total commercial properties are either delinquent or have been foreclosed. These commercial properties include industrial, retail, offices, casinos, hotels, apartments and condominiums.

Office vacancy rates surged by almost 25 percent, including subleases, while retail vacancies reached 10 percent, twice the increase since last year. Similarly, industrial vacancies also posted an increase by almost 11 percent.

Industry analysts said that what is currently happening in the commercial real estate market mirrored that in the residential market.

They said that the recession and unemployment have taken their toll on the commercial real estate market in Las Vegas, pushing vacancies to record levels and prompting landlords to reduce rentals to attract tenants.

They said that the abundance of supply in commercial real estate is compounding the market problem. Supply of industrial properties is pegged at 3.3 years, 7.9 years for office properties and 2.7 years for retail properties.