Commercial Property:What the heck is going on?

Commercial property has been the focus of my life ever since I left the electronics industry some 22 years ago.   I had the good fortune to see one year of peak demand when I entered my new vocation.  I mistakenly and naively thought I had found the proverbial “pot of gold”.   It was 1987 and the last hurrah for the Boston’s “white hot” commercial real estate market.  What I thought was a robust market turned out to be the peak.

In short order Bank of New England disappeared and the FDIC created RECOLL Management.  This entity was created to hold the non-performing real estate loans and manage the vacant commerical real estate scattered throughout New England.  Bankrupt assets made up a good deal of my practice back then.  The late 80’s were no fun.

Cyclic corrections appear inevitable for the real estate business.   Why?  My observation is that “people move on and its a big world”.  By this I mean as human beings we are accustomed to change.  We deal with the reality that confronts us.  This does not necessarily mean we remember and memorialize what got us in trouble in the first place.  We do not learn from our mistakes particularly when they come disguised as new sources of capital namely REITs.

Today far too much of the overall real estate market is being affected  by the California, Florida, and Utah residential real estate markets.  These markets will stabilize if left alone and this is what Washington needs to get into its collective head.  The market will flush these assets through its system if we just allow it to function freely.

Binswanger has been in the business of delivering value to owners for over 70 years.     Visit our website at www.binswanger.com