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Last week’s Globest.com Quick Poll asked readers to weigh-in on the future of projects currently under construction. The danger of aborting under construction projects is imminent according to 81% of readers, while 19% are feeling more optimistic. Scott Weiss, managing director of commercial real estate at the Gutierrez Co. indicates the in-construction projects face a Catch-22, as a push-and-pull emerges between securing financing with preleases, favoring smaller projects.

“More projects than not are probably in danger of not getting done. That doesn’t mean they won’t get done. I think the larger projects which rely on a bigger piece of construction financing are in more danger. They rely on a big construction loan and big construction financing. And the bigger banks that have the capacity to do that really aren’t lending at this point in time. Or it’s much more difficult to get a loan and it covers a much smaller piece of the overall cost.”

“On one side the banks are worried about financing a project with a tenant that might back out. And a tenant is worried about committing to a lease at a project that might not get financing. So the smaller projects, I think are probably faring better and have a better chance, because the financing is probably more solid. Especially if it comes from a smaller community bank, a regional bank where their balance sheets look a lot better already.”

“If there’s one good, strong tenant that’s preleased on something smaller, [banks] feel better about it than if you’re relying on compiling three, four, five or more lease arrangements for a one-million-square-foot-plus type development.”

“I think even a lot of these larger projects, once you get to a construction stage a lot of effort has been put into permitting and land entitlement and leasing…and it likely is just a matter of time until these projects go forward again. It may be with different financing, it may be with different owners, but it’s probably just a matter of time.”

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