They Are Not Talking About It: Commercial Foreclosures Are About To Peak In Michigan.commercial Fore

They are not talking about it: Commercial Foreclosures Are About to Peak in Michigan

. Get Ready For a Short Sale Boom!

Its a double edge sword. For everyone out there on the brink of foreclosure there is someone dreaming of owning a property at bargain basement prices. Opportunity knocks in the Michigan Commercial Real Estate segment. Is anyone there to answer that knock?

The Commercial Real Estate market not making sense lately. It seems to everyone that strip malls are largely vacated. Some I see have never reached 50% occupancy. With the cost of construction remaining constant and demands for rental spaces decline here in Michigan, prices MUST be lowered to maintain occupancy and at least partial cash flow. But we are not seeing that happen.

As business leases expire a great number of them opt to move as a cost saving measure. A lot of small businesses are failing here in Michigan, but most of the tenants I have witnessed moving out of the strip malls willingly have decided to buy bank owned commercial buildings. It only makes sense to buy for 50% off rather than rent at 2006 prices.

It is secretly acknowledged in many banking circles and conversations that a lot of these notes for these buildings are due and the banks are choosing finally to pull the proverbial plug on the delinquent notes. No one seems willing to say how many delinquent or maturing notes are in their bank portfolios. I doubt I would believe any number that was presented to me.

In 2011 we will see a cascade of commercial defaults and a glut of vacant commercial space. A great number of the notes are not being paid due to the reduction of potential commercial tenants. The lenders last resort is to step in and repossess. They dont want to do this. It looks bad to their investors.

There may be a lot of opportunity for these banks to reset the values to a small degree if they are willing to be aggressive in their stewardship of these venues. Filling them to 100% occupancy prior to resale would make some sense. To an investor, there is something very sexy about a strip mall or multi use property that is fully occupied. It signifies stability and security.

Since the astute investor will pay for a property based on its cash flow only, they will likely adjust the prices accordingly. Vacating a property of all of its cash producing tenants is foolish. If you are a Trustee or property manager consider filling these spaces for no other reason but to make the property look better from an investment point of view.

So its time for all of us to come clean in Michigan and start leasing these spaces for TRUE market value. Stop dreaming about lease prices that were used to predict the viability of your investment when you built it. Quit using bogus projections of future rents. Escalating rent scales and covering your cam are no longer part of the equation. Get those spaces filled at any cost if you want to sell that building.

Of course, there is always the possibility of a short sale of your commercial property. We will discuss that in a later article. The main consideration in my mind is this. Why is no one talking about this? Will there be another bailout of the large banks with respect to these commercial loans? Time will tell. It always does.

If you have a property that is a problem for you, then call us. We WILL NOT sell trade or distribute your information in ANY way. I HATE SPAMMERS.

Your identity will be held in the strictest of confidence.

OR if you like, you can call me directly at 616-837-7630.

Clint Maki, Michigan Broker

Thresholds For Living Realty

616-837-7630

by: Clint Maki

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