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The commercial real estate dilemma Thursday, February 04, 2010
NEW YORK (CNNMoney.com) -- Luckily for banks, the commercial real estate time bomb just keeps on ticking.
Industry observers have issued dire warnings for more than a year, suggesting that lenders are on a collision course with potentially billions of dollars worth of commercial real estate losses.
But for all the gloomy talk, the fallout has remained relatively well contained.
Banks have already recognized about $50 billion in losses, or about 60% of the estimated cumulative losses, according to real estate research firm Foresight Analytics.
And despite a steep drop in the price of apartments, office buildings and industrial properties nationwide over the past year, there have been recent indicators to suggest that the market may have finally hit bottom.
After 13 months of consecutive declines, overall commercial property values climbed 1%, according to the most recent monthly reading by Moody's/REAL Commercial Property Price Index.
Even well-respected bankers have offered a glass half-full outlook on the state of the commercial real estate market.
"Commercial real estate is a train wreck, but it's already happened," JPMorgan Chase (JPM, Fortune 500) chief executive officer Jamie Dimon said during a company-sponsored conference last month.
But some commercial real estate industry experts have been quick to caution that the problems aren't over yet.
High-profile purchases that were made at the height of the real estate bubble have started to implode left and right. Last month, owners of New York City's Stuyvesant Town and Peter Cooper apartment complexes went into default.
Farther south, lenders that helped finance the Four Seasons Resort and Club just outside of Dallas are moving ever closer to foreclosing on the swanky 400-acre property.
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