Bank and Freddie Mac Foreclosures for Sale Affect Commercial Market

by Donald Hanz on Foreclosures

Aside from the huge supplies of foreclosed residential properties, like Freddie Mac foreclosures for sale, various areas of Pennsylvania is also facing worsening conditions in their commercial property sectors. Vacancies in office buildings and commercial centers are rising and values of structures are declining.

Foreclosure sales in Philadelphia are still weighing housing values down, but that is only part of the problem of the metro area's real estate market. Its office building market is faring even worse, with the downtown area recording a vacancy rate of 12.6% in the third quarter of the current year, according to figures released by Grubb and Ellis Co.

Just like bank foreclosures in Pennsylvania, the commercial real estate industry is getting worse mainly because of layoffs and business closures. The suburbs are getting hit the worst, with office buildings recording rising vacancy rates in the third quarter. As of the end of September, the overall vacancy rate in the suburbs of the state is pegged at 18.4%.

Along with huge supplies of bank and Freddie Mac foreclosures for sale, metros in Pennsylvania are also facing poor commercial property market condition mainly due to the continuous rise in the number of the unemployed. People who have lost their jobs and those who are expecting to be laid off are staying away from shopping centers and retail stores, prompting retailers to leave the area which consequently results in higher vacancy rates in commercial spaces.

The situation is the same in the multifamily commercial real estate market which includes condominiums and apartments, with these commercial residential units also suffering from vacancies. According to local market observers, aside from unemployment, apartments and condos are also losing out to cheaper real estate foreclosure properties for sale.

According to them, if it is a choice between renting or buying a regular apartment or purchasing foreclosed multifamily units, buyers will definitely go for the latter just because they can hardly afford the former. Vacancy rate for multifamily structures in the state is at 8%.

The negative impact of the high number of bank and Freddie Mac foreclosures for sale is expected to continue in most areas of Pennsylvania. For now though, it is the commercial property market that is getting the worst of it.