Commercial Bank Owned Foreclosures Rising

The rate of commercial Bank Owned Foreclosures in Texas jumped higher than home foreclosures this year. According to market data, commercial foreclosures increased by 139 percent in the counties of Williamson and Travis.

A total of 523 commercial foreclosures were posted, representing an increase from 219 in January, compared with 410 repossessions made in 2008. The figures represented an increase of 60 percent foreclosures from 2007. These commercial Bank Owned Foreclosures include office buildings, apartment buildings, industrial, retail buildings and undeveloped commercial lands.

Meanwhile, foreclosure postings for office buildings dropped by 36 percent from January to July of this year. By comparison, home foreclosures rose by 38 percent during the first seven months of this year.

Federal Reserve Bank of Dallas economist D’Ann Petersen said that the increase in commercial foreclosures did not come as a surprise considering the current economic and financial climate. Petersen said that in 2008, when the financial situation was starting to get worse, the commercial property investment activity dropped significantly as credit became difficult to obtain.

Petersen pointed out that the market situation remained unstable this year as lending institutions are trying to avoid adding commercial Bank Owned Foreclosures in their balance sheet. Industry experts explained that lenders and banks are offering loan extensions and modifications to avoid foreclosing on commercial properties because they do not want to realize their losses on commercial loans.

Petersen, on the other hand, said that the economic crisis in Texas reduced investors and buyers’ demand for many types of commercial properties, particularly retail, adding that the failure of some retailers left many properties without tenants.

Commercial foreclosures accounted for 8 percent of the total foreclosures in Travis and Williamson counties for this year. And many industry experts predicted the continuous surge of commercial foreclosures before the year ends.

They expect that the second wave of foreclosures in both counties would be in retail properties because of the drop in retail spending and the rise in the number of retailers who closed shops.

But some industry experts offered a positive note on an otherwise bleak situation. They said that the commercial real estate industry in Texas is faring better in the current economic crisis than in previous recessions.

The other area in Texas where commercial Bank Owned Foreclosure took a dramatic jump is Dallas-Fort Worth, where commercial postings reached 109 percent.

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