The U.S. economy faces further devastation from the crash of the residential real estate market as commercial real-estate borrowers who took out mortgages during and right after the frothy days of 2007 now need to refinance. Stephen Blank, senior fellow with the Urban Land Institute, said that two-thirds of these loans are not going to qualify for refinancing.
Speaking to an April 21 meeting of fixed-income managers in Charleston, South Carolina, Blank said the market will need $300 billion for commercial real estate financing per year through 2017.
Tad Philipp, director of commercial real estate research with Moody’s Investors Service, called many of these borrowers, “Zombie commercial real estate borrowers who are too good to default, but not good enough to refinance.”
Avison Young, in a spring report on the U.S. commercial market, warned that, with an estimated $360 million in commercial mortgages coming due in the first half of this year, the U.S. market should brace for defaults on “over-leveraged real estate.” If there appears to be a number of such “potentially toxic mortgages” it will reinforce “the nervousness inherent in the U.S. lender community,” the AY report cautions.
