The word these days in the world of commercial leasing is "scramble": Developers are scrambling to pay off creditors, leasing agents are scrambling to find tenants, and banks are scrambling to find deals that show more than just a promise of a good return.
FTC "The problem is there's no money out there," said Tom Shaner, a spokesman for the National Association of Office and Industrial Parks in Baltimore. "And there's pressure on existing projects to come in on those loans."
Although the local real estate world is rife with rumors of pending bankruptcies on large commercial buildings, leasing specialists say to date there have been very few actual bankruptcies or foreclosures in the Baltimore area. But, they say, the coming year may be a bleak one.
"The S&L crisis doesn't help at all," said Robert Kleinpaste, the president of Baltimore's Legg Mason Realty Group. "That's caused some people to put everything on hold. It's tough out there. Sure, there's going to be more [bankruptcies] in the next ++ year."
Just six months ago, said Robert Minutoli, a vice president with the Rouse Co., developers "sailed through" the loan process with lenders. "But in the last 90 to 120 days there has very clearly been a much more insightful inspection of projects by lending sources."
Several commercial buildings developed by Peter Issel in Columbia have foreclosed or are in the process of foreclosing and have attracted attention as an indication of serious problems in the local leasing market; several commercial real estate agents say those problems have more to do with partnership problems than the current economic climate.
Columbia's Twin Knolls, Woodmere I and Woodmere II have been foreclosed or are in the process of foreclosure while Three Lakefront North operates under Chapter 11 of the U.S. Bankruptcy Code.
"There's more talk of bankruptcy than there is a reality of it," Mr. Kleinpaste said.
Fred Glassberg, the president of Crystal Hill Investments in Columbia, agrees.
"I don't have the perception that the world is going to hell in a
handbasket," he said. "Any bank could put me under in a second but it wouldn't do them any good. As long as the banks are trying, things are in good shape. Once they stop working with people, you've got trouble."
As for those projects that are or may be in trouble, some local real estate experts say the "vulture buyers" are beginning to circle over them.
The vulture buyers offer to take troubled properties off the hands of overextended lenders at bargain prices, sometimes 30 percent below market value.
"Yes, the bottom fishers are starting to make themselves available but nobody is selling on their terms yet," said David Frederick of W.C. Pinkard Co. & Colliers International.
Mr. Kleinpaste offers another reason that troubled office buildings remain on the blocks.
"They don't get scarfed up in this market because financing is so difficult to come by," he said.
Just as important to the commercial leasing business this day is what hasn't been done, leasing agents and real estate agents say. A number of large projects, many of them in the Baltimore-Washington corridor, remain dormant although they have been approved. Others are filling up slowly. Large developers like Conrad Cafritz and Trammell Crow Co. Inc. have put their commercial building developments on hold until problems in the financing market have been corrected.
The Rouse Co. believes there has been some minimal overbuilding in the Baltimore area, Mr. Minutoli said, but that overall the commercial leasing market is in good shape.