Sep 15, 2009

"Commercial subprime" crises?

Throughout the Washington area, gleaming new office towers have sprouted, but with few or no tenants.Property managers for the 1.4 million-square-foot [Constitution Center in Southwest Washington], which is scheduled to be completed in November, have yet to land any tenants .Constitution Center is just one of several dozen existing, newly constructed or soon-to-be-completed office buildings in the Washington region that had vacancy rates in the 80 to 100 percent range as of midyear.

With many commercial real estate loans coming due soon, some foresee trouble for the region's properties. "We may see the commercial version of the subprime situation," said Steve Silverman, director of the Montgomery County Department of Economic Development.

Economic activity is a major driver for companies to take up commercial space in various parts of the country and if GDP growth is not keeping pace with corporate expectations, companies will slow down on their off take of space.

Our hope at PrivoCorp (since we process Conventional and FHA loans) is that economic activity continues to grow and residential activity is spurred by this growth in economic activity.

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