Over the last few years, the Bay Area has been one of America’s most challenging commercial real estate markets. 2024 looks like it will be much of the same. What can commercial lenders do to mitigate risk in their Bay Area investments?
The TLS team reviewed 193 commercial foreclosures in the Bay Area and gathered some insights that can help commercial lenders prepare themselves for a tough market this year.
Bay Area Commercial Foreclosures By the Numbers
Entering February 2024, the Bay Area had 193 commercial foreclosures, according to PropertyRadar.com.
- Many of the foreclosed commercial properties are bank-owned.
- Commercial foreclosures were often located in rural areas or underdeveloped neighborhoods, but there were exceptions.
- Retail spaces and office buildings make up a significant portion of commercial foreclosures in the Bay Area.
Downtown San Francisco had the highest concentration of commercial foreclosures, followed closely by Downtown Oakland and then Downtown San José. However, commercial foreclosures were generally scattered evenly throughout the Bay Area, even in rural and residential areas.
San Francisco Commercial Foreclosures
San Francisco has struggled with homelessness, crime, and street-level drug use, which, according to the San Francisco Chronicle, has made Downtown San Francisco less desirable for retail companies or office space.
“Major retailers have left Downtown San Francisco,” says Randy Newman, the founder and CEO of Total Lender Solutions. “Brands like Old Navy, Whole Foods, Nordstrom, and Express chose to leave citing unsafe conditions for customers and employees.”
“The effects will be felt far outside of Downtown San Francisco, so Bay Area lenders should be prepared for that.”
What Can We Learn From Commercial Foreclosures in the Bay Area?
San Francisco’s struggling commercial real estate market may impact other places in the Bay Area, even neighborhoods that have strong commercial potential.
For example, we found an office building in Berkeley purchased for almost $20 million in 2018. It entered foreclosure short $11 million on its loan. The building is located in a nice part of town with plenty of nearby retail stores and residences.
There’s another property in the heart of Silicon Valley that’s short $53 million on its loan. It was built as recently as 2012 and assessed at $85 million.
“Many commercial foreclosures in the Bay Area are office buildings,” says Randy.
“These are not areas that are dealing with high levels of crime and drug use, like Downtown San Francisco, but vibrant neighborhoods that should have commercial potential.
“Since Covid-19 there’s been less interest in office spaces because of companies shifting to remote work. It’s a nationwide trend.”
When To Start a Bay Area Commercial Foreclosure
Contact Total Lender Solutions immediately if your borrower has stopped making their loan payments. Our team will guide you through the foreclosure process and make sure you get the best possible resolution.
We handle foreclosure processing in the Bay Area and all of California, and we can work with either institutional or private lenders.
