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Caution pervades California commercial real estate markets

On Behalf of | Mar 18, 2016 | Commercial Real Estate |

The connection between the strength of the U.S. economy and the strength of the commercial real estate market is one that seasoned owners of warehouses, office buildings and other commercial property in California may have understood, but they are now being forced to confront the many problems connected with an economic slowdown. One problem of major concern is a change in the lending practices of banks and other lenders with regard to commercial property.

A shift to restrictive lending practices brought about by concerns that shopping malls and other commercial properties could see a decrease in investor demand have made it more difficult for developers to continue with projects that have already been started. For commercial real estate developers, the inability to obtain additional financing for their projects could result in serious financial difficulties including foreclosure. This is also the problem facing landlords who must refinancing mortgage loans that were taken out years ago with short maturity dates.

Another factor complicating the already complex area of commercial and industrial property financing is reluctance on the part of Wall Street investors to purchase securities backed by mortgages on commercial property. While this has caused one analyst to reduce its 2016 issuance forecast by up to 30 percent, buyers of commercial and industrial real estate with sufficient assets to be able to complete a transaction without relying heavily on financing continue to be active in the marketplace.

Real estate attorneys, can often be of assistance to prospective developers in navigating the current commercial real estate climate. Legal counsel may be aware of new lenders that are becoming active in providing mortgage financing.