Good Thing the U.S. is Getting Into Commercial Real Estate

A new Senate bill that just passed committee would drive the creation of more science parks around the U.S. Specifically, the bill would allow the Secretary of Commerce to guarantee up to 80% (!) of loans over $10m for the construction of science parks.

REISofficeVacancyQ22009 Whoa, good thing that. After all, we don’t have nearly enough vacant office space in the U.S. Rates are only running at a near-record 16.5% (according to Reis), with many cities at 20% vacancy and higher. And commercial real estate loans extant are merely teetering and threatening to bring down the regional banking system, so adding a few million more square feet will just give the system a helpful shove into complete insolvency.

I get that bill sponsors Olympia Snowe (R.) and Mark Pryor (D.) want to be helpful and create legislation to drive innovation. And I get that building science parks is fun and cool and way easier than actually doing science. So I understand the temptation entirely.

But are you people completely mad? What are you thinking by adding subsidized office space to a market already under severe stress? Total vacant sublease space in the U.S. is already 82m square feet, and total vacant space is around 800m square feet (according to Colliers). The idea that the government would tromp in adding more space at this point is … well, nuts. (And don’t even get me started about the white elephant nature of science parks, let alone their chronically high vacancy rates.)

Will someone in Sheila Bair’s office at the FDIC please talk the Senate out of this? I really wasn’t counting on the government itself causing us to have to bail out the entire regional banking system.

[Update] More from Dane at Growthology.