Last week, Richard D. Purtell, RPA, the chair and chief elected officer of BOMA Intl., testified before Congress on the growing commercial real estate credit crunch and the General Services Administration (GSA). Purtell’s testimony before a hearing of the House Subcommittee on Economic Development, Public Buildings and Emergency Management of the Committee on Transportation and Infrastructure specifically focused on the challenges of leasing and building during an economic crisis.
“With virtually no liquidity, commercial borrowers face a growing challenge of refinancing maturing debt and the threat of rising foreclosures and delinquencies,” Purtell said during his testimony. “We are faced with the dual challenge of developing strategies to stop the downward spiral and restoring confidence in markets.” Purtell explained that this is the worst liquidity challenge that the U.S. property market has faced since the Great Depression.
Purtell stressed that the time to act is now and that the need is to enact measures that will enable financial institutions to effectively restructure their balance sheets, take toxic assets off banks’ books, and start lending again on solidly underwritten transactions. He also congratulated Congress on its allocation of funds to GSA to implement energy efficiency retrofits in federal buildings in effort to help the construction industry, which has been hit especially hard by the credit crisis. The stimulus bill funded projects such as solar roof installations, lighting system upgrades, advanced metering, green roofs, and exterior envelope retrofits.
However, Purtell did caution the subcommittee against the overuse of short-term leasing extensions. Currently, the government is overusing these leasebacks, which are costly for both landlords and the federal government. To avoid these costly leasebacks, Purtell encouraged the subcommittee to consider ways to help streamline GSA’s leasing practices.
BOMA Intl. also testified before the House Subcommittee on the effects of the credit crunch on commercial real estate last July.