National REO Brokers Association Seeing Increased CRE Foreclosure Activity

The National REO Brokers Association (NRBA) says its members are reporting increased commercial real estate (CRE) foreclosure and resale activity as 2023 comes to an end. While much of the national focus is on distressed assets in the office space sector, more of the smaller, stand-alone structures that house small businesses are being repossessed and resold as well.

According to Michael Krein, President of the National REO Brokers Association (NRBA), a growing number of NRBA brokers are reporting significant uptick in the number of small CRE properties coming back on to the market. A recent report from Epiq seems to support this, indicating there were 631 commercial bankruptcies filed in October, 2023, an increase of 106% year-over-year. The Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations also shows a decrease in CRE mortgage borrowing of 44% year-over-year.

NRBA is a national trade association dedicated to supporting and assisting the nation’s elite real estate brokerages and financial institutions, mortgage servicing companies, developers and investors with all aspects of real estate default management, including with CRE assets of all sizes and categories.

“Not everyone can re-sell a small commercial property quickly,” Krein observed. “Training and experience are required to ensure that a post-foreclosure resale is compliant and effective, especially in situations involving Small Business Administration (SBA) loan defaults and the like. It’s in every community’s interest to get new owners into abandoned structures like gas stations or stand-alone restaurants quickly to avoid the potential for blighted properties and all of the consequences that follow.”

Krein points out that strip malls, convenience stores, churches, small multi-family residential units, churches, drug stores, restaurants, special use buildings, light industrial structures and more are being foreclosed upon by banks nationwide as small businesses struggle under the weight of inflation and post-pandemic conditions that have dampened demand for a number of “in-store, “dine-in” or “in-person” experiences.

“The silver lining of this trend is that it’s usually local or regional investors seeking to purchase commercial REO properties, often to launch new concepts or businesses more resilient to the impact of things like online retail or Door Dash dining,” he said. “They keep the community moving forward by getting these properties back into the market and retail sectors.”