Chysler and GM Dealer Cuts Will Hurt Commercial Real Estate
If commercial real estate needs another body blow right now, the closing of thousands of auto dealerships by Chrysler and General Motors is going to hurt commercial real estate prices across the country.
Nearly 2,000 dealerships will be closed or re-purposed in the next year or so as the big automotive companies cut the number of franchises. The banks that have lent the money to buy the land for the dealers are going to be facing a significant devaluation of the properties as they tend to be large and centrally located. Plus, with all the inventory coming onto the market at once it will depress property values for the whole automotive sector of the commercial market.
But the dealer closures would especially be another on the depressed U.S. commercial real estate market, which is off more than 20 percent from a year ago.
The meltdown in office and other nonresidential properties has already squeezed U.S. financial companies, with banks from Goldman Sachs Group Inc (GS.N), to Citigroup Inc (C.N) and insurers from American International Group (AIG.N) to MetLife Inc (MET.N) reporting billions in write-downs.
“It could have an impact on commercial real estate,” Jackson said. “This is single purpose real estate that has to change use now. So there will be a lot of that coming at one time.” via Reuters.
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Comment by Financial Freedom in 2015 on 18 May 2009:
This is a disaster for real estate owners, investors and employees.
Comment by Portland Real Estate on 18 May 2009:
Entire auto rows will be shaken up. These dealerships provide a lot of tax money to the cities, it will be sad to see them go.
Comment by John Brown on 19 May 2009:
It is sad to hear. We have a number of dealerships in our area and this will create holes on some prime market ways.
Comment by Antony Lexington@Home loan on 7 November 2009:
It certainly does not bode well for a fast recovery in the economic climate. This will affect all real estate across the board pushing home prices further down and probably rent prices higher. Now matter what happens it seems to make rent prices higher. The home loan industry may have to look into creative ways to encourage the right people to borrow money.