Usually, commercial real estate cycle booms and busts are affected by the construction of too much space. In this cycle, problems have arisen from the financial sector, seeping into that of commercial property.
The financial lending crisis and not overbuilding as in the past, has been the problem.
The weak economy is now driving down rents. Many property owners are finding it difficult to refinance short-term financing when due this and next year. Property values will move down, as in residential housing.
But many larger commercial owners, such as publicly owned real estate investment trusts (REITs), will do better. Especially those with substantial equity and access to public funds. It will be an opportunity for them who can take advantage of marked-down available assets at lower cost.
When the economy turns, the real estate industry will have relatively little supply. The upturn will fill the vacancies and rental rates will move up drastically once more.
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