The Next Shoe To Drop

No, I am not talking about the Senate in their bid to take up the Obamacare  bill. I'm talking real estate here. What's not greatly talked about in the "dead cat" bounce, or in the "W" market scenario is just HOW we might test the March 9 lows on the DOW. You do remember DOW 6,627 don't you?  :-( 

The residential real estate market is still reeling. Foreclosures and still climbing; however, many think the bottom is in.

Ah, but what about the commercial market? Now that's the other shoe that's about to be pulled off and thrown into the fire. Every real estate person I know is talking about the coming disaster that's now under way. People are walking away from their leases. A realtor that I talked to last week mentioned two clients (renting 15,000 sq. ft. spaces), just left in the dark of night, never to be found. Large malls are fretting over the potential loses of major national chains.

Here in Houston it's not just Circuit City stores that are shuttered leaving gaping holes in the strip centers and malls.

As George Ure posted on his blog this morning, "Here's one of the drivers to be watching:  I was talking to one of my sources who's pretty well 'plugged-in' to the commercial real estate market.  "You know George, I've got one client who is a national retailer who has just negotiated a zero rent deal because the landlords are becoming so desperate to keep big-name tenants in operation...because when anchor tenants go, the traffic count drops and the remaining stores in a strip get upside down and the owners then find their properties in a downward spiral.  So what we're seeing is a lot of the anchor tenants are renegotiating great deals."

Many commercial establishments are just barely holding on and waiting for this holiday season to begin wherein many retailers net 40% of the year’s income in 40 days. So, what's going to happen when sales don't match the expectations? Can you say VACANCIES galore come 1Q 2010?

Of course one need not worry Ben Bernanke says all is well and that the recession is over.

Tell that to the tens of millions of unemployed people!