INDIANAPOLIS—
Imagine trying to own and operate your own small business in this economy. It's challenging enough. Then imagine trying to do it when all of your neighbors are vacant store fronts. It's what a local businessman said is a daily reminder of how close you could come to closing up shop."When we first opened it was good. We had a florist next door, a tanning salon, so it was very good. In the last few years, when we've lost most of the tenants in this strip, it gets difficult because there's not a lot of reason for people to come here and stop at two or three places."
Jay Noel and his wife have operated "Abbott's Also" out of this location for the past 15 years. They hope to be around at least another 15. Unfortunately, their story is repeated in store fronts across central Indiana and the nation.
"There's increasing vacancies, values are depressing, and that's a big struggle for property owners," said Tim O'Brien, president of Resource Commercial.
Some experts worry the mortgage crisis that all but destroyed the residential market, could happen to some effect on the commercial level.
By 2012 nationwide, nearly a trillion and a half dollars in commercial real estate debt is set to expire. Why does it matter? Well it matters because it's nearly half of all of the commercial real estate debt combined."
"You can't refinance. If you're value has fallen and your increased vacancy, you've got to come up with a lot more cash out of pocket to get the same terms," explained O'Brien.
"What do you do? Do these owners simply hand over the keys and say I'm sorry, there's nothing more I can do?" asks Noel.
Experts says banks don't want to foreclose. They don't want to deal with the headache. So, for now, many are turning a blind eye and making the terms work. In the world of commercial real estate, it's called "extend and pretend," and it's how many are staying a float.
As for Noel, he'd just like to have a little company.
"The problem is with the economy the way it is, people are just not opening businesses at this point in time," he said.
Experts predict the commercial real estate market to completely bottom out by as early as this fall and then hopefully begin to recover. They say the key to success in the future is developing responsibly. In other words, less is definitely more.
