Low commercial real-estate prices mean lower entry costs for entrepreneurs
Commercial real estate prices are low enough that many entrepreneurs are looking to grab deals on the new storefronts and facilities they need to grow their businesses or start a corporation.
Moody’s Investors Service says that commercial property prices have plummeted 42 percent compared with prices in October 2007. Office and retail space prices have also fallen – dropping 32 and 28 percent respectively.
“There is excess space, which opens an opportunity for small firms,” Bill Dunkelberg, chief economist at National Federation of Independent Business told the Wall Street Journal.
However, banks are taking additional precautions when making loans for commercial properties because they have seen an increased default rate on those loans. A recent report by Real Capital Analytics found that commerical mortgages were defaulting at a 4.2 percent rate – the highest rate in nearly 20 years. The Journal reports that it’s not unusual for commercial loans to take up to two months.
That trend has been especially hard on community and regional banks, according to the Journal, because they hold more than half of all commercial mortgage loans.