Nationally, about $3.4 trillion in commercial real estate loans is outstanding, and some experts predict a wave of defaults in the next few years that could make the mortgage meltdown look like a strong wind before a hurricane. While some call for government intervention to head off the next financial crisis, others say the magnitude is too great. The debt crisis facing Dubai, with its custom-island extravagances, could be a global foretaste.
With a largely jobless recovery from the “Great Recession,” the root of the problem seems deep. Millions of office and industrial workers have been laid off this year alone, meaning a diminished need for physical job sites and a rise in commercial vacancies. Although Baton Rouge seems relatively resilient economically, commercial lending trouble has appeared. Mall of Louisiana owner General Growth Properties filed for bankruptcy in the spring, and banks that financed Tommy Spinosa’s Perkins Rowe development foreclosed on the project in the summer.
“I’m sure there are some loans out there that might be an issue for local banks,” says Larry Dietz, managing broker for Sealy & Falgoust Real Estate. “We’ve already seen major properties have issues in this community. Those are few and far between. How far it’s going to go in terms of smaller properties or smaller investors, I couldn’t begin to speculate.” For the full version of this story, click here.—Todd R. Brown
