Commercial Property Plagued by Credit Crisis
An article published by Financial Times discusses the effects of the current credit crisis on commercial property. According to the article:
Global credit turmoil has spilled over into the market for bonds backed by US commercial mortgages, threatening to push down property prices and scuttle deals.The decline in CMBS issuance is crucial because such securities have provided an estimated 40 to 60 per cent of financing for new commercial property purchases in recent years.
Market turbulence is also raising the cost of commercial mortgage borrowing.
Investors have fled the CMBS market, in part because of worries that riskier lending practices in commercial real estate would lead to higher defaults, industry executives say.
The news of these negative effects on commercial real estate is definitely not good news. This will affect businesses that would otherwise be helping to keep the economy moving. Yes, it is a bigger risk than mortgages on homes, but business and commerce are what make the money flow and keep the economy strong. Even locations such as Utah have become hard to get loans in, requiring many owners to take out a utah home equity loan.
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