Monday, September 21, 2009

Commercial Real Estate Industry in Need of Assistance

By Rico Setyo

For the past year, we have been in a recession and many financial institutions have suffered greatly. According to an interview with Daniel Tishman, CEO of Tishman Construction by CNBC, the next industry to fall and suffer the pain of a declining economy is Commercial Real Estate. Commercial real estate is property such as building and land that is intended to generate profit. Even though the housing market seems to be picking up again, the commercial real estate industry remains to decline. Jay Miller from Dow Jones mentions that the transaction volume for the industry dropped 1 percent in June and 5.1 percent every month after June. In addition, the sales have also drastically decreased from 1100 sales a month to 375 a month that is more than 60 percent drop.

The industry has already suffered from the declining economy with a staggering unemployment rate of 18.2 percent. One of the problems that this industry faces is the fact that many companies need to refinance but there is not enough capacity for it. Since the money will not be there for refinancing, there is a possible chance of many companies within the industry to collapse which will cause an increase to the nation’s already high unemployment rate of 9.6 percent.

Daniel Tishman has been in the industry longer than most people considering that his firm Tishman Construction is one of the oldest commercial real estate firms in the US. He tells news reporters that the collapse will occur in the next five to seven years if the government does not find a way to help them. He also states that 3.4 million dollars will need to be refinanced and since the money is not there from most banks, he feels that the government should intervene in the situation and boost the industry with cash to stimulate the industry.



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