Get All Access for $5/mo

Will the Commercial Real Estate Bubble Burst Your Small Business?

By Nina Kaufman

Opinions expressed by Entrepreneur contributors are their own.

Small businesses are already besieged by the prospect of rising taxes, health care costs, and tightening access to credit. A recent report by the Congressional Oversight Panel indicates that there may be more troubles in store.

Small business may get another punch to the gut when commercial real estate mortgages come due over the next three years.

As noted by Rieva Lesonsky on Small Business Trends, pundits are considering the effect that we could experience a commercial real estate fallout, much like the fallout for residential real estate mortgages. Community banks in particular have been cited as vulnerable because they have disproportionate amounts of commercial loans on their books relative to their assets. According to Elizabeth Warren, chair of the Congressional Oversight panel (which monitors the financial bailout), half of all commercial mortgages will be "underwater" by 2011. This means that the borrower owes more on the loan than the property is currently worth.

The net effect for business owners? If you have such a mortgage for your commercial property, consider refinancing now. If you're a tenant, be prepared for the possibility that if your office building goes into foreclosure, you may need to relocate--pronto. And for all taxpayers, be prepared for the real possibility that another major bailout program may become necessary.

Got a few hours with nothing to do? Check out the report of the Congressional Oversight Panel, "Commercial Real Estate Losses and the Risk to Financial Stability"--makes for curious reading.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

Is One Company to Blame for Soaring Rental Prices in the U.S.?

The FBI recently raided a major corporate landlord while investigating a rent price-fixing scheme. Here's what we know.

Side Hustle

This Former Starbucks Employee Started a Side Hustle That's Making More Than $70,000 a Month — and He's Not Done Yet

When Tom Saar moved to New York City, he spotted a lucrative business opportunity.

Making a Change

Expand Your Communications with This $20 French Class Subscription

Gain access to hundreds of video lessons and assignments with this deal.

Thought Leaders

Break Free From Client Burnout With These 6 Strategies

How much stress is too much stress? Here are some effective strategies for managing burnout when working with clients.

Business News

The Most Downloaded News App in the U.S. May Have Published Dozens of Fake, AI-Written Stories

The stories were fake but had real-world consequences for the app's 50 million monthly users.