Commerical Real Estate Time Bomb

We are on a unstoppable trajectory toward higher foreclosures and exploding delinquency levels than have been seen in decades. The change over the last few months has been startling and the East coast states are holding many of the top position with Rhode Island leading the list during the past few months.

We have seen the 90 day+ delinquency rate for properties go from a weighted average of 0.09% in May of 2007 and then to 0.25% in May 2008. Now we are seeing it approaching 1%. But the problem is really with the worst areas such as we see below.

Commercial Real Estate Delinquencies as of 4/2009)

  1. Rhode Island 3.58%
  2. Montana 2.65%
  3. Florida 2.48%
  4. Indiana 2.45%
  5. South Carolina 2.38%
  6. Arizona 2.32%
  7. Michigan 2.10%
  8. Nevada 2.04%
  9. Tennessee 2.02%
  10. Hawaii 1.78%

The foreclosure rates are also moving higher as states like Michigan, Nevada and Georgia are all approaching 1% this month.

(Click to Enlarge)


The concern is that while the percentages may seem small, they are growing exponentially. For example, the weighted average foreclosures are up 20% from March to April and there has been an increase of 10% for those newly late in payment by 30 days and that is up by 25% since the beginning of 2009.

Companies we are watching. (P/E ratios are there for informational purposes as they are not the best to use for valuing REITS)