Commercial Real Estate: Zombie Buildings, The Next Hole in the Economy

While the overall U.S. financial system is showing signs of stability,a rapidly rising tide of troubled loans for commercial real estate threatens the survival of hundreds of the nations small and medium-sized banks.

Financial reports this month from federal regulators and industry analysts detail a new cycle of uncertainty that they fear could cripple the economic recovery. Billions of dollars in commercial debt will have to be paid back or refinanced at a time when property values have plummeted. About $500 billion will come due in 2010 alone and an equal amount every year through at least 2012, according to the Federal Reserve. Many banks that cater to regional and community developments were largely unscathed by the residential mortgage meltdown. But now they are facing huge numbers of possible defaults by builders who erected
thousands of office towers, condominiums and shopping centers with the easy credit available five years ago. With few tenants, those developments are turning into what industry insiders call zombie buildings

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