Experts Predict a Serious Crisis in Commercial Real Estate

Share Article

While the focus has been on the residential real estate crisis, the commercial real estate sector is facing a major crisis as well, say experts.

I anticipate cap rates will rise 2-3 points as an average, with the best quality deals reaching 8 caps and maybe higher.

While the focus has been on the residential real estate crisis, the commercial real estate sector is facing a major crisis as well, say experts. Gil Priel, Co-Founder of the Peak Corporate Network (PCN) predicts that declines in commercial values would be the next shock to the financial system. Priel stated that, "I anticipate cap rates will rise 2-3 points as an average, with the best quality deals reaching 8 caps and maybe higher."

Eli Tene, PCN's Co-Founder and a leading loss mitigation expert, projects "a full disaster" in commercial real estate industry, "with at least a 20 percent price drop in 2009, and in some areas much more". Tene stated that the commercial real estate market faces a financial drought with "almost no new constructions loans and no land purchase loans will be originated."

Raffi Tal, COO, of I Short Sale, Inc., a leading loss-mitigation advisory firm reported on a significant increase in demand for commercial short sale: "We have seen an increase of 80 percent in commercial short sale inquiries in California. Some of the inquiries included land, a hotel, a shopping center, stores, and even a bowling alley."

The three experts join others in observing a tremendous vacancy growth in all areas -- retail, industrial and apartment buildings. Adding to the challenging times are liquidity problems that make it difficult to get funding from banks for purchasing or refinancing the inventory.

When asked, none of the experts agreed to point on a recovery timeline. "This time we are going to see a long term recovery", stated Priel, "the hope to see a change of course in the economy by the end of 2009 is a little too optimistic in my opinion".

The Peak Corporate Network (http://www.peakfp.com) is a platform of companies founded or acquired by principals, Gil Priel and Eli Tene. The desire to offer the best "one stop" full network of real estate services is the driving force behind the formation of these companies.

I Short Sale, Inc. (http://www.ishortsale.com) is a leading nationwide short sale, modification and loss-mitigation advisory firm. Since 1991, it has assisted, through its principals, thousands of homeowners to avoid foreclosure. The company has developed a far-reaching network of property owners, mortgage companies, banks and realtors.

# # #

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Shoham Nicolet

Shoham Nicolet
Visit website