America’s second-largest market is a good place to have a stake in commercial real estate. California has a strong commercial market, and the 2024 forecast looks promising. However, commercial foreclosures are never entirely preventable, even in a strong market with cautious lenders.
Entering 2024, there are a number of commercial foreclosures in Los Angeles that highlight the risks posed by soaring property values and development obstacles.
The TLS team studies the commercial real estate market on a regular basis to help lenders stay prepared. Here are a few properties that provide helpful insights on what to expect this year.
Los Angeles Commercial Foreclosures By the Numbers
At the start of February, Los Angeles had 209 commercial properties in foreclosure, according to PropertyRadar.com.
- Downtown Los Angeles had the highest concentration of commercial foreclosures, with about 46 in the city center and surrounding areas.
- Commercial foreclosures have occurred all throughout LA County, in areas that are residential, urban, rural, and tourist-oriented.
- Los Angeles commercial foreclosures span a wide variety of properties: mixed-use lots, vacant lots, storefronts, hospitals, warehouses, office buildings, and more.
Although Downtown Los Angeles had the highest number of commercial foreclosures, it doesn’t appear that any one type of property was impacted more than others, and no part of the county had a significantly higher number of commercial foreclosures.
How Many Los Angeles Commercial Foreclosures Are Intentional?
Many of the foreclosed properties in Los Angeles are short by very small balances, which may suggest that borrowers are strategically defaulting to try and secure better loan terms.
For example, there’s a property in the fashion district that was purchased for $190,000 in 2004. The property is short $23,000 on its loan—a small percentage.
A medical center in West Hollywood was bought for $226 million in 2010. The property is only $387,000 short on its loan. [Since 2010, the property value has risen to nearly $1 billion.]
“California’s commercial real estate market is very strong,” says Randy Newman, the founder and CEO of Total Lender Solutions. “Commercial property values are soaring, so it’s possible that borrowers are doing what they can to earn better terms on their loans. Borrowers might view a strategic default as a better option than refinancing. This is a tough market for refinancing.”
Los Angeles Commercial Foreclosures Are Often Mixed-Use Developments
Dozens of commercial foreclosures in Los Angeles are mixed-use developments.
For example, there’s a mixed-use property on Ocean Front Walk in Venice that was recently built in 2020. After getting bought in 2021, the property is short $30 million on its loan. The property has an excellent location on the beach with plenty of foot traffic to support a retail business (there are retail stores open next door), yet the property has entered foreclosure.
There’s another ocean-front property in Long Beach that was bought for $7 million in 2010 and is short $5 million on its loan. The development was originally intended to have residences, retail space, and hotel rooms but has never come to fruition.
“Mixed-use developments face many challenges in California, even with the right financing and support from local governments,” says Randy. “Some communities in California have been resistant to mixed-use developments or high-density housing.
“The State of California is starting to make it easier for these developments to break ground, but lenders should still be prepared to face unexpected obstacles.”
When to Start a Los Angeles Commercial Foreclosure
Get in touch with Total Lender Solutions if you’re ready to begin a commercial foreclosure in Los Angeles. TLS manages the entire foreclosure process for commercial properties in California, including reconveyances and UCC sales.
We utilize an experienced team of foreclosure experts to get you the best possible outcome in a foreclosure situation, whether you’re an institutional or private lender. Contact us today so we can put together an effective strategy for you.
