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Report Says Prices for Commercial Real Estate Dropped Substantially in June

August 20, 2010

Commercial real estate prices saw their steepest drop in nearly a year this past June, a new report says. As Redlands commercial real estate loan modification attorneys, we were interested to see an Aug. 19 report from Bloomberg News, about the newest numbers from Moody's/REAL Commercial Property Price Index. That index dropped by four percent between May and June of 2010, the article said, the biggest drop since July of 2009. The Moody's index is calculated according to changes in commercial property sale values on a monthly basis, then combined and reported once per quarter. This report applies to the second quarter of 2010. In that quarter, it said, prices are down 0.9 percent from the beginning of the year.

Among types of commercial properties, the biggest drop came from retail spaces, such as malls and shopping centers. The index for those spaces dropped almost 11 percent in the second quarter. Industrial properties dropped by 2.9 percent. On the other hand, apartment buildings and office buildings saw a 4 percent gain. All of these properties are affected to some extent by the recession, the article suggested. Some observers had hoped that better results in the earlier part of 2010 were signs of an economic recovery, but the article said any recovery may now be faltering. Retail sales and consumer confidence were low this month, the article noted. One analyst quoted in the article said buyers may have been optimistic earlier this year because of better-than-expected retail sales, but this is now slowing down.

As Los Angeles County commercial real estate loan modification lawyers, we are disappointed to see that investors may have been overconfident. Because we work frequently with individuals and companies in financial distress, we are well aware that the economy has not rebounded as vigorously as anyone would like. A down economy is bad news for commercial real estate owners because without commercial activity, borrowers face a double-edged sword. On one side, depressed property values have put many loans underwater -- especially loans that were originated when property values were high, during what is now being called the commercial real estate bubble. Being underwater means the owner cannot refinance. On the other side, a bad economy also means fewer tenants, renters or guests filling those commercial spaces and pumping money into the business. As a result, some owners can't pay back loans or refinance, sticking them with immediate payment demands they simply cannot meet.

Howard Law PC helps borrowers in this position get some relief by negotiating a loan modification with their lenders. Commercial loan modifications may be called "extend and pretend" by some, but they don't just extend the loan -- they change its terms to give the borrower the conditions needed to fully repay it. Our Dana Point commercial real estate loan modification attorneys have yet to encounter a lender in this economy that is willing to make careless gambles. Rather, we believe lenders are extending loans and granting loan workouts because they truly believe the real estate market will rebound, and property owners' conditions will improve enough for them to repay their loans. We work hard to convince lenders that this is in everyone's best interests, avoiding a foreclosure that is sure to lose money for all parties concerned.

If you're a commercial property borrower with a loan you know will need to be modified, Howard Law can help. To learn more or set up a free consultation, please contact us through the Internet or call 1-800-872-5925 today.