March 30, 2001

SF is Not Alone - Major Cities Face Real Estate Bust

In San Francisco's South of Market district -- formerly home to many tech startups -- available sublease space has skyrocketed 225% in just four months to 2.6 million square feet! And real estate expert Kenneth Rosen predicts that another 4 million square feet of office space will be vacated as many more dot-coms go belly up. But, San Francisco isn't the only city in the U.S. facing real estate woes.

In New York, more than 20% of the office space leased by dot-coms since early 1999 has been returned to the market. In Seattle, the vacancy rate more than doubled from 1.7% at the end of last September to 4.2%. And in parts of Silicon Valley, vacancies have reached an alarming 12%.

In fact, the amount of sublease space available in San Francisco, Los Angeles, Chicago, Dallas, Seattle, and Manhattan has more than doubled in just over a year.

Translation: The real estate market is on a collision course with disaster, and it will take down banks, credit unions, and mortgage brokers along with it. In Japan, real estate values plummeted after the bubble burst and they have still not recovered. The real estate market's collapse buried Japanese banks in loan defaults to the tune of $1.2 trillion.

The U.S. banking system could be headed in the same direction if the recession gets much worse. The FDIC reports that 25% of banks are vulnerable to a downturn in real estate. And Salomon Smith Barney put out a study that projects loan defaults will total about $33 billion this year. The real estate bust is just getting underway -- protect yourself by keeping tabs on your bank. Check its Weiss Safety Rating periodically by calling 1-800-289-9222 or visit

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