Commercial real estate in slow burn

(Park Record) The commercial real estate industry is in the midst of a perfect storm, says Zions Bank vice president of real estate Michael Morris. He expects 2010 to be more of the same, but is optimistic farther out.

The monthly report from the federal Congressional Oversight Panel (COP) charged with overseeing Troubled Asset Relief Program (TARP) spending was released Feb. 11 and makes many of the same arguments but says the "storm" could reverse economic recovery.

At the heart of the issue are commercial loans that are coming due over the next four years that will need, but won't receive, refinancing.

"We're in the midst of the 'deleveraging of America,'" Morris told attendees at the annual CCIM | NAIOP Utah Commercial Real Estate Symposium Tuesday at the downtown Hilton in Salt Lake City.

The value of commercial real estate is down 43 percent nationally. The total debt load is $3.5 trillion.

Morris said commercial real estate value has lost $1.6 trillion. The COP reported that pension funds hold 68 percent of commercial real estate equity.

Nationwide, 150 banks have closed and that number may double or triple, he added. The COP estimates 37 percent of banks are at risk especially community banks.

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