Will the Commercial Real Estate Bubble Burst Your Small Business?

min read
Opinions expressed by Entrepreneur contributors are their own.
comm-real-estate-costs.jpgSmall businesses are already besieged by the prospect of rising taxes, health care costs, and tightening access to credit. A recent report by the Congressional Oversight Panel indicates that there may be more troubles in store.

Small business may get another punch to the gut when commercial real estate mortgages come due over the next three years.

As noted by Rieva Lesonsky on Small Business Trends, pundits are considering the effect that we could experience a commercial real estate fallout, much like the fallout for residential real estate mortgages. Community banks in particular have been cited as vulnerable because they have disproportionate amounts of commercial loans on their books relative to their assets. According to Elizabeth Warren, chair of the Congressional Oversight panel (which monitors the financial bailout), half of all commercial mortgages will be "underwater" by 2011. This means that the borrower owes more on the loan than the property is currently worth.

The net effect for business owners? If you have such a mortgage for your commercial property, consider refinancing now. If you're a tenant, be prepared for the possibility that if your office building goes into foreclosure, you may need to relocate--pronto. And for all taxpayers, be prepared for the real possibility that another major bailout program may become necessary.

Got a few hours with nothing to do? Check out the report of the Congressional Oversight Panel, "Commercial Real Estate Losses and the Risk to Financial Stability"--makes for curious reading.



More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur