Similar to the way subprime homes foreshadowed the collapse of residential real estate back in 2006, the increase in foreclosed lower level commercial properties is indicating that a similar scenario will soon play out through all levels of commercial real estate. I think this commercial collapse will become more prevalent in the coming months, and will continue for the next 2-3 years. It's only a matter of time until SRS is back to at least 55-60, and there are abundant opportunities to acquire hard assets.
The recent run up in IYR, and the fall of SRS has been due to the market rally, and the fact that many REIT's have been able to raise equity. However, for those of you with short memories, many of the Financials rallied on their first time raising equity in 2007, and every financial that rallied eventually rolled over and continued the slide lower. The same will happen with the REIT's. There are just WAY to many headwinds.
Here is a clip from today's South Florida business paper.....
We're just getting started here in Florida, as these properties are just beginning to get foreclosed on, and the process is complicated and takes months. However, when these properties do begin to hit the market, that is when the destruction will begin. That is when the foreclosed assets will depress every other piece of commercial real estate around them. (Just as subprime homes decimated entire neighborhoods).
We are quickly approaching the days where land is all but worthless. The epicenters are MIAMI, LA, and VEGAS, and the rest of the country will soon feel the ripples.
This is a pretty gloomy post, but unfortunately the collapse of commercial real estate is inevitable.
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