Second foreclosure wave likely to hit commercial property
DALLAS – The economy and the real estate market are slowly bouncing back.
But experts fear that a second wave of foreclosures is rolling in and this time, commercial real estate is the target.
Broken fences, graffiti and trash litter a vacant lot near Central Expressway and Walnut Hill Lane in Dallas.
Forty two acres of rocky landscape, it was meant to be the foundation for a redevelopment vision filled with apartments, retail stores and restaurants.
But the vision crumbled.
“It’s kind of an eyesore. I just would like them to do something, make some progress,” said neighbor Charles McFarland. The multi-million dollar project is now facing foreclosure and set to go to sale next month. More vacant lots are going to pop up in North Texas and all over the nation.
The commercial real estate market is facing its own crisis, and it’s a market worth trillions of dollars. Over on Turtle Creek, a for lease sign stands on a site, where the plan was to build a boutique hotel.
Experts say developers are putting projects on hold or heading into foreclosure because of the economy.
“We are seeing more and more foreclosures. We are seeing circumstances that a person who owns the property can’t make their interest payments or loan payments. The banks are working with them, but it’s sad to report it’s going to be an ugly scene,” said SMU professor, Mike Davis.
Tough times are expected until 2011, according to Brad Crumpecker, a Dallas financial analyst. “Everything right now with the credit markets for commercial real estate is sort of in limbo,” he said. Crumpecker says there’s money to lend. It’s just harder to come by and more expensive.
Lenders are tightening their belts, turning away developers with good credit.
“Even if you have been making your payments and you go to your bank for a refinance on your commercial real estate loan, it may well be that they don’t have the capacity to refinance you,” he said.
Experts say Texas is standing on better ground, compared to other states, because it didn’t over build. However, there’s a rocky road ahead.