Recently, there’s been news about rising commercial property foreclosures in Texas. Is this a reflection of nationwide trends, or is there anything unique about the Texas commercial real estate market that’s causing this problem?
Let’s dive into this issue a little further to address the concerns that commercial lenders might have.
Are Commercial Foreclosures Increasing in Texas?
According to data released by Attom Data Solutions, which monitors Texas property foreclosures, commercial foreclosures in Texas increased 129% year-over-year.
55 commercial properties entered foreclosure in March 2024, an increase from 42 in February.
This generally reflects the trend of rising commercial foreclosures across the country, a trend that started after the Covid-19 pandemic. In Texas, office space seemed to struggle the most, but commercial foreclosures were spread across many different property types.
Why is This Happening?
There may be several reasons commercial foreclosures are increasing in Texas. First, there are the market factors:
- Less Demand for Office Space: COVID-19 sparked a nationwide shift to hybrid and remote work, so there’s less demand for offices. This sector has been hit the hardest.
- Changing Consumer Habits: Covid-19 also sparked greater interest in online shopping, so the retail sector has also faced challenges as consumers turn to eCommerce.
- No More COVID Relief: Many borrowers were able to secure mortgage relief during the pandemic, but these programs are now ending. Business owners who were unable to stabilize their debt situation may now be in financial distress. This is also true for homeowners; distressed homeowners will not spend as much money on retail businesses, which could exacerbate the issues in that sector.
It’s also worth noting that Texas has the country’s fastest foreclosure process; lenders that wish to pursue foreclosure are able to start the process much faster than in many other states. This might skew the numbers in Texas a little bit. In states like California and Arizona—where it takes much longer to foreclose on commercial properties—the number of foreclosures might be spread out over a longer period of time rather than being condensed together over a shorter span of time.
Should Lenders Be Worried?
Randy Newman, founder and CEO of Total Lender Solutions, says commercial lenders shouldn’t buy into the scary rhetoric about Texas commercial foreclosures.
“What we’re seeing is a return to pre-pandemic levels. There were few commercial foreclosures during the pandemic due to relief programs. The numbers we’re seeing are similar to the numbers back in 2019, before the pandemic started. Yes, commercial foreclosures are rising, but they’re not at historic levels. Not even close.”
-Randy Newman
Randy reminds lenders commercial real estate is still lucrative. Other factors, such as poor business management, high balloon payments, and non-monetary breaches, are also responsible for a high number of defaults.
Need a Foreclosure Firm in Texas? Contact Total Lender Solutions
Contact Total Lender Solutions if you’re dealing with a commercial foreclosure in Texas. We can manage every aspect of the Texas foreclosure process, making sure that you’re in compliance with Texas regulations and our team works diligently to protect your money and assets.
