Realty Check

Published: Friday, 10 Jul 2009 | 2:38 PM ET

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I want to continue on my thread from yesterday regarding the plight of commercial real estate. Several witnesses at the Joint Economic Committee hearing warned that without more liquidity in commercial lending, the sector would be heading for crisis. In fact, it already is there. There is simply no securitization market for commercial loans right now, and without that, the well is pretty dry.

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In another aside, a report in the Wall Street Journal this week detailed how beleaguered retailers are trying to exercise clauses in their leases to get rent reductions. The clauses are based on other tenants leaving a shopping center. Some retailers expect to save up to $10 million by exercising these rights.

So here you have commercial property owners getting hit with the double whammy. They're losing retailers, then they're losing rental income on the retailers they still have, then they're unable to get any kind of refinance on their loans because there is no commercial credit out there to be had.

You beginning to get the picture?

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