South Florida's residential and commercial real estate markets suffered in 2008, and the New Year doesn't figure to offer much relief. Continued foreclosures and weak economy will continue having an impact on prices and number of properties available with only aggressive sellers disposing of properties.
Although home sales started picking up this summer, the beleaguered housing market has been hammered by foreclosures and falling prices. Meanwhile, the sputtering economy has local businesses retrenching and cutting jobs, dealing a blow to the retail, office and industrial sectors. All this carnage creates an opportunity for those positioned to take advantage of the adjustment in prices, and higher expected returns.
What follows is an outlook of the region's commercial real estate markets as 2009 approaches:
Commercial Real Estate
As far as commercial real estate goes, retail, office and industrial markets in South Florida started 2008 fresh off a historic run-up in prices that saw signature properties fetch top dollar.
However this year businesses have cut jobs, leading to more office, retail and industrial vacancies. Ultimately, landlords will be forced to reduce rents, which will mean a decline in property values. As fewer tenants look for new digs more commercial projects are expected to stall. Some observers believe that building sales will increase in 2009, but only because bargains will be plentiful.
On the retail front, small and large merchants are struggling to stay in business. General Growth Properties, the nation's second-largest mall owner, warned in November that it could file for bankruptcy protection. Foreclosures of Commercial properties such as hotels, offices etc. are expected to rise because building owners don't have the cash flow to pay their mortgages as tenants struggle to pay the rent.
Paralyzed by the credit crisis, the commercial real estate industry is the latest to seek a government bailout of sorts. In November, a dozen real estate development groups banded together to ask Uncle Sam for help avoiding looming defaults, foreclosures and bankruptcies.
Some of the country's biggest developers have asked Treasury Secretary Henry Paulson to be included in a $200 billion loan program recently created by the government. The program, the Term Asset-Backed Securities Loan Facility, was intended to support the market for car loans, student loans and credit card debt.
In a letter to Paulson, commercial property leaders warned that thousands of properties are in danger of foreclosure because current financing is coming due and new financing is hard to come by.
Unlike residential mortgages, which can have up to 30-year repayment schedules, commercial mortgages are repaid over five-, seven- or 10-year terms, with balloon payments at the end of the term. If refinancing is unavailable, an owner would be faced with a distress sale or losing the property in foreclosure.
In commercial real estate's most recent heyday, the commercial mortgage-backed securities (CMBS) market provided easy money for purchases and refinancing. That market disappeared in the summer of 2007.
About the Author:
A variety of Miami Real Estate and Miami Commercial Properties are available at great prices at ConstecRealty.com. Miami Condos and real estate in other Florida areas such as South Beach, Aventura and Key Biscayne are also available for the taking.