When one thinks of foreclosures, the growing debt in the housing market is the first thing that typically comes to mind. While these foreclosures are hitting the highest numbers, foreclosures of non-residential properties are at an increase since the beginning of the Great Recession in 2007. This is a serious concern for businesses, as the still-struggling economy leads to a decrease in business and an increase in debt accumulation. For New Jersey, in fact, commercial property foreclosures carry the most pronounced increase in foreclosures in the state.
In the economic downturn in 2009 alone, the state saw a total of 3,827 foreclosure filings for non-residential properties. In 2011, these filings reached 5,027. While this year is still underway, it appears that the trend will continue to surge. As a result, there’s been a scaling back of commercial projects, with many turning toward non-retail outlets such as businesses focused on health and wellness.
Some types of New Jersey businesses, mainly retail businesses, and especially small retail businesses, are having problems with rolling over mortgages and renewing lines of credit. However, for many types of businesses, things are beginning to look up. Industrial properties are seeing their values increase, and office space demand is also growing. As the economy improves, it’s hoped that these types of foreclosures will also begin to improve and businesses can see a time of safety again. Debt accumulation is a serious issue for a business, often leading to foreclosures and other dangerous debt conditions that are not only negative for the business but for the people who run the business and work there as well.
Much like with individuals and families, when debt spirals out of control for a business, bankruptcy protection may offer a means to solve the underlying financial problems under the guidance of the court. In such a manner, many business entities are able to chart a passage to calmer waters. By coming up with a plan approved by the bankruptcy court, a business may be able to conquer its debt problems while laying the foundation for a return to economic prosperity.
Source: WNYC, “Foreclosures Still Climbing For NJ Commercial Properties,” Joe Tyrrell, April 9, 2012