The Return of Commercial Real Estate

One of the interesting things about practicing real estate law over a period of decades is you get to experience first-hand the various business cycles that make or break business markets.

In the early 80’s, with interest rates in double digits and the economy in recession, the commercial real estate market here was in a state of collapse.

But, of course, it recovered.

By 2006, commercial real estate had become red hot, with deals happening so fast the banks and title companies couldn’t keep up with all the activity.

And then, the Crash.

Suddenly banks stopped lending, builders stopped building, buyers became scarce, and prices tumbled.

Our own fabled M&I Bank had to be sold, under a crushing burden of bad loans made to Arizona and Florida builders.

The commercial real estate world was bleak; there were now too many brokers for the deals that were available, title companies had a fraction of their previous work, and it was impossible to sell except at bottom feeder prices.

At FOS, our commercial real estate practice, a big part of what we do, just dried up.

A few transactions occurred, but most of our time was being spent dealing with problems our existing clients had with banks as a result of the downturn, and negotiating workouts for our real estate clients.

The last thing business owners had on their minds was taking on debt to expand into new quarters, or build a new headquarters. The perceived risk was simply too great.

And when everyone was sure that commercial real estate would be done, perhaps for a decade, 2014 arrived.

Suddenly the title companies were frantically trying to complete deals and inventory became harder to find.

At our firm, we had almost a dozen commercial real estate closings in October alone.

The progress of the US economy, pent up demand, and low interest rates had combined to create a perfect storm.

My mentor, Bill Fox, told me when I joined the firm that practicing law would be a humbling experience.

He meant that the demands are difficult, the problems are complicated, and coming to good solutions for clients would challenge me daily.

He, of course, was right.

And one of the humbling experiences has been dealing with the evaporation of one of your practice areas one day, and the explosion of it the next.

(But let me be clear—having lived through both, the explosion is much better than the evaporation.)