Lately it seems all my blogs are about seminars or information sessions I have attended - so why stop now! This morning I had the good fortune to attend an information session hosted by the Western Canada chapter of the CCIM (Certified Commercial Investment Member) organization, the most respected name in commercial real estate in the world. The second best part of the session was the U.S. commercial real estate market update (Oh the best part? Breakfast of course).

Is Anyone Buying Commercial Real Estate in the U.S.?

And the answer is Yes! Yes, actually commercial real estate sales volumes are actually increasing and U.S. Federal Reserve Chairman Ben Bernanke has projected a 3-4% increase this year (full disclosure - I didn't quite hear if it was a predicted increase in economic activity or commercial real estate sales - either way, somebody is going to be happy). Regardless, the economy south of the border is slowly improving.

The interesting thing is not the increasing volume of sales, but why the volume is increasing. That is the second most interesting part (here I go again, this time you have to wait to hear the most interesting part - but it's worth the wait). Why is sales volume increasing? Because so many people are defaulting on their commercial mortgages that the banks have had to foreclose in a big way and are selling off commercial real estate (often called CRE in the States) assets in large numbers - at record low prices. These buildings are so empty, that they are being sold way below their potential value. Sorry, no, that's not the best part...but it's coming. Now FAIR WARNING, these buildings are not being sold at ridiculous prices. Every property always sells at market value (yes I know there are exceptions). All the great deals you have heard about from your friends or in the news actually sold at market value. If a building is 60% vacant it is probably losing money. What is a property worth that is losing money? Usually less than nothing. So the prices drop dramatically to allow the purchaser to have a building that is not losing money. The fantastic opportunity lies in being able to hang on to the building until the market returns to normal one day - and it will. So today's market value offers huge future potential.

MIxed Signals

So next year promises to be interesting. The U.S. economy as a whole is slowly improving but there is an elephant in the room and he will be sneaking out from under the rug next year. Sounds like a movie in the making.

Okay, enough of that. The best part? Well the best part could be the worst part depending upon your personal situation. The best part is the elephant in the room. You see, the dollar volume of commercial mortgages coming due every year for the last couple years has been somewhere around $500 billion/year. In 2012, next year, the amount of commercial mortgages coming due is a staggering $1800 billion. Wow! (I wonder if they come due on December 21, 2012. Just saying) So next year could see an incredible flood of defaults and who knows where things will wash out.