Economic Indicators for Commercial Real Estate Market
Tough Times Ahead for Commercial Investors
Commercial real estate won’t recover until late 2011 or 2012, according to a survey commissioned by PricewaterhouseCoopers.
The survey asked more than 100 real estate investors when they believe the industry will improve. The predominate sentiment in the industry was cautious—even negative.
Overall, survey respondents said that with $1.4 trillion of debt maturing by 2012, some owners will find surviving the downturn very difficult.
Pricing in the industry will be more influenced by government and regulatory policy than by occupancy levels or rents, said Robert White, President of Real Capital Analytics.
Investors also will find lower rents and falling tenant demand to be a challenge. Other troubling issues will include the worsening prospects for national retail businesses.
Source: Reuters News (12/18/2009)
Commercial Real Estate Still in Trouble
A recovery in the commercial real estate market still seems unlikely in the short term, say industry experts who examined the issue last week during a conference sponsored by The Wharton School of business at the University of Pennsylvania.
Billionaire investor Sam Zell predicted that it will be three to four years before the 7 million jobs lost during the recession are regained. Zell said there hasn’t been substantial new commercial development since July 2007. As a result, vacant properties will be leased, but at 35 percent lower than current rents, he says.
Barry Sternlicht, chairman and chief executive of Starwood Capital Group, said the U.S. is in serious trouble because the regional banking system is nearly bankrupt and short selling is fueling any rally in real estate investment trusts.
“I’m not at all bullish on the U.S.,” Sternlicht said.
Source: Dow Jones Newswires, A.D. Pruit (12/11/2009)
Fed: Economy Improving, Commercial Still Weak
The U.S. economy has “improved modestly” since early October, the Federal Reserve said Wednesday in releasing its monthly “beige book” survey of regional economic conditions.
The Fed said residential real estate sales increased everywhere but the Northeast. Also, fewer homes overall were being built.
The report also said commercial real estate was worse than the residential market, with conditions reported to have weakened in virtually all districts, with “rising vacancy rates, downward pressure on rents, and little, if any, new development.”
Overall, the Fed reported that the labor market remained weak in most areas, but it noted improvement in some areas and an uptick in retail sales.
Source: The Wall Street Journal, Sudeep Reddy (12/03/2009)
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