This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Commercial Real Estate May Be Doomed

By Kevin Grewal, Editorial Director at www.SmartStops.net

NEW YORK ( TheStreet) -- As residential real estate foreclosure numbers seem to be subsidizing and rates of negative equity are easing, the residential real estate sector appears to be stabilizing, however, the commercial real estate sector is a different story.

The troubles in the commercial real estate markets continue to unwind, which is evident in the most recent problems seen by the Dubai World. In fact, some experts suggest that the default rate in speculative-grade debt will hit 12% to 14% by the end of the year, marking a 28-year high. What makes this predicament even more unique is that it is not only the small business owner who is defaulting on payments, large companies with assets north of $100 million are as well.

One reason the sector is struggling is the direct correlation of cash flow in commercial real estate to macroeconomic factors like the labor markets. Labor markets continue to remain weak. The most recent data published by the Labor Department illustrates that the number of newly filed unemployment claims continues to rise by numbers higher than expected by analysts. As long as this trend continues, cash flow will likely remain weak in commercial real estate.

A second reason the sector is hurting is due to the lack of available credit. In prior years, one was able to refinance and extend out payments, but this is no longer the case. Many large and healthy banks are reluctant to lend and are hoarding cash to repay TARP funds and build a protective barrier for 2010.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
RWR $89.37 0.00%
VNQ $79.00 0.00%
AAPL $121.30 0.00%
FB $94.01 0.00%
GOOG $625.61 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs