Commercial Real Estate Bubble

September 19, 2009 Posted In Economic News Market Conditions Politics Real Estate News

Las Vegas Commercial Real Estate Bubble

You would have to be blind not to notice all of the Commercial Real Estate vacancies here in Las Vegas. Driving through town with every turn and on almost every block we see vacancies for offices, retail and specialty stores.

What amazes me is that there is still new construction taking place on commercial property.

As we see more and more businesses closing every week the vacancy rate continues to climb. I can’t be the only one that sees this.

This will defiantly be the next big hit on the economy here locally. Why do the banks continue to loan for new commercial projects with such a high vacancy rate? Do they just assume that the Tax Payers will bail them out again?

Perhaps it is time to use some common sense and consider a moratorium on new construction permits. As much as I appall Government intervention into the private sector someone needs to display some leadership. I much prefer the idea of a moratorium on new construction permits than I do another round of bank bailouts.

I am not suggesting a moratorium on casino construction. That is an entirely different class of commercial property and I realize that casino operators are taking advantage of reduced building costs.

We have not yet recovered from the busting of the “Housing Bubble” and when the commercial sector implodes it will send shock waves through the economy unlike we have seen yet. The devastation will be compounding as it will cause even more businesses to fail. The difference between the “Housing Bubble” and the “Commercial Real Estate Bubble” is that the commercial sector has the potential of being more destructive to the economy.

Is this treat of the “Commercial Real Estate Bubble” a local phenomenon? No it is not. You can see similar rates of commercial vacancies nationally.

Do I believe a permit moratorium would stop the pending collapse of the commercial real estate market here? No I do not, but at least we could lessen the blow. Las Vegas Foreclosures already leads the nation in home foreclosures. Do we really want to lead the nation in commercial foreclosures too?

It is not a question of “if” the commercial real estate sector will collapse but “when?”.

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