We've been talking about the precarious state of commercial real estate for some time. Now Congress is apparently getting nervous about it, too -- and the very real possibility that whatever is now passing for an economic "recovery" could be derailed rather quickly by a catastrophe in the nearly $7 trillion commercial real estate market in this country.
Democratic Congressman Paul Kanjorski from Pennsylvania joined with Republican California Congressman Ken Calvert Monday to send a letter of concern to both the U.S. Treasury Department and the Federal Reserve. In a broad (and rare) show of bipartisan support and concern, 77 other members of the House signed on to the letter.
On his website, Congressman Kankorski says, " The growing bubble in the commercial real estate industry has the potential to infect our economy and slow a recovery."
For his part, Congressman Calvert is quoted on the website as saying, " I am deeply concerned about the health of our commercial real estate market and the stability of thousands of small businesses across the country."
What is sparking this heightened level of concern--no, make that fear-- is the more than $1.4 trillion in commercial mortgages that will be coming due by 2013. As much as 65% of them will find it tough going getting refinanced, according to a Deutsche Bank analysis.
The commercial real estate market in the U.S. supports some 9 million jobs, I should point out.
The New York Times points out that the congressmen want the two federal agencies "to make clear public statements encouraging lenders to continue to make credit available for performing assets, even if the value of the property has taken a hit in its value."
In his State of the Union address, President Obama said the worst of the economic storm had passed, apparently not noticing the dark storm clouds just over the horizon. Maybe this time, Congress will actually take action before the most nasty weather moves in.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate and related issues for several years.
