South Florida Banks Bear The Brunt Of The Commercial Real Estate Meltdown

Despite the fact that the residential housing marketplace is starting to show signs of recovery, South Florida’s commercial real estate is still in crisis.  Bludgeoned by empty storefronts, diminishing rent prices and difficult to acquire credit, a sizable number of South Florida commercial property owners face default on their bank loans.  Many fear that this could trigger an additional round of bank failures and further impede the economic recovery of the region.

Over the years, South Florida’s community banks have invested in commercial properties such as hotels, shopping centers and office space.  According to analysis conducted for the Miami Herald, Florida financial institutions have twice as a lot of commercial loans in their portfolios as out-of-state banks.

A recent example of the commercial actual estate crisis is the seizure of Chicago-based Corus Bank by federal regulators.  Corus was a major player in South Florida’s commercial actual estate market and was undone by heavy lending in construction and commercial actual estate.

From Fort Lauderdale to Boca Raton, there are far more and a lot more “For Rent” and “For Lease” signs appearing on commercial properties.  A lot of highly desired commercial locations are now sporting vacancies.  Local development projects are also under distress and face either cancellation or foreclosure such as the former Grand Bay Hotel in Coconut Grove.

The well being of a commercial actual estate market often provides a excellent look at the viability of a local economy.  With South Florida employers continuing to lay off workers, a lot more office space goes unused.  This causes less folks to have less buying power, causing retailers to have difficulty just hanging on, let alone opening new stores.

The negative impact of this crisis on South Florida’s overall economy is substantial.  Real estate development, both commercial and residential, is 1 of Florida’s leading industries.  This multibillion-dollar business also supports numerous residual businesses, including construction, property management, interior design, furniture sales and property appraisers.

Adding to this dilemma is the fact that financing has dried up and few banks in South Florida are willing to refinance maturing bank loans.  In the past, Wall Street would provide a considerable portion of cash for commercial properties by bundling these loans into securities.  Due to prior issues in our monetary institutions, this is no longer a viable option.  One ray of hope in this crisis is that the Treasury Department is attempting to boost the mortgage packaging marketplace by encouraging investors to purchase new securities by offering attractive new loans.

Only time will tell if this technique can jump-begin South Florida’s floundering commercial actual estate marketplace.