Why The Commercial Real Estate Market Will Obviously Fall

December 12, 2007

Of course commercial real estate is going to fall. Why? For the exact same reason residential real estate is falling. But, there hasn’t been an oversupply of commercial real estate, you say. Well, the oversupply is not the core reason why residential is falling right now. Residential RE’s problem is that easy, cheap money brought upon wreckless, imprudent speculation from players who were not well versed in the real estate game – and even those who should have known better. The current oversupply is a byproduct of that liquidity induced speculation. Why split hairs? Because the devil is in the details. The downfall of CRE is the rampant speculation that caused many to significantly overpay for assets that are quite illiquid and take significant expertise and time to improve (or even sell), even incrementally. Not only did they overpay, but they applied significant leverage as well, much more than the industry norm. Seeking Alpha Reports

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