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Commercial Delinquency Costs Hit Record Low; Raises Questions About Next Year

WASHINGTON, DC-An industry survey co-author examining the level of loan delinquency costs historically says that the market has been continuing, and successfully for that matter, to overcome the woes of the last recession.

By Diane Cook | Updated on November 21, 2000

WASHINGTON DC-In the third quarter the commercial real estate market hit the lowest level of loan delinquency costs in the past 35 years. The previous low occurred in 1982.According to the November Giliberto-Levy Monitor, an industry survey, the last eight years have seen a steady and unprecedented decline in delinquency costs.

“It’s probably best to say we have been in an eight to nine year expansion of the economy,” says John B. Levy, the study’s co-author. “The economy has been on the mend since last great depression for real estate [in the late 1980s]. Costs have been coming down. We are at an incredibly new low level of nine basis points, basically down 96% from the peak.”

“We had [in the 1980s] an incredible expansion of new buildings,” Levy reports. “In fact, new buildings were built without a lot of funds or tenants. When the economy slowed down, we had all these buildings built on speculation. A lot went back to lenders because the developers couldn’t pay them. We had default and delinquent loans. We’ve been kind of working off that since the peak in 1993. Now we’re in a level that is about as good as it gets.”

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