According to Real Estate Econometrics, commercial mortgage default rates more than doubled to 3.4% in the 3rd quarter of this year. A year prior (3rd quarter 2008), commercial mortgage default rates for loans held by U.S. banks were close to 1.37%. In the 2nd quarter of 2009, commercial default rates were close to 2.88%.

Mortgage loans for commercial properties originated in 2006 and 2007 are experiencing the most significant shortfalls in current operating cash flow in relation to current debt-service obligations. Prices for most commercial properties nationwide have fallen close to 40% since the start of the ongoing Credit Crisis. Particularly hard hit are the regional retail shopping malls due to the drop in consumer spending.

Regional banks hold about 25% of all of their assets in some form of commercial real estate. As a result of price and rent declines coupled with increasing vacancy percentage rates, there should also be a lot less new commercial construction nationwide. The FDIC just released a report recently that noted that business loan requests had dropped to an all-time record low as fewer new businesses are starting up nationwide.

As a result of the ongoing and worsening Credit Crisis, lenders and property owners who wish to sell are discounting their prices significantly for much needed cash. We continue to search for the best bargain discounted prime commercial properties such as retail centers, hotels, office buildings, and other prime properties for our clients who are interested in buying and holding for the long term.