May as well kiss commercial real estate goodbye, at least till sometime next year. Yeah, fat chance!
The latest report from the National Association of Realtors is darker than a nighttime boy scout camp out without a roaring fire.
On its website, NAR’s chief economist says, “Because of the lingering impact from the deep recession over the past two years, vacancy rates will trend higher and many commercial property owners will need to make rent concessions.”
But if there is any light ahead at all, it comes from Lawrence Yun’s insistence that commercial real estate “almost always” lags the rest of the economy.
“With the job market expected to turn for the better later this year, we’ll see rising demand for office and warehouse space, but that isn’t likely before 2011.”
Now, you may have taken note of one thing that is a lot for Mr. Yun to hang his hat–and prediction–on: that the job market is “expected to turn for the better later this year.”
I guess it depends on one’s definition of “turn for the better?”
If having fewer people laid off each month is turning for the better, I guess that it is. But, so far, nothing would indicate that any meaningful non government jobs are being created and, even if that were to start happening, economists expect it to take years before the employment level reaches its peak of just a few short years ago.
At what point, then, does this rather tepid “turn for the better” translate into a more robust commercial real estate sector?
Besides, as Mr. Yun seems to forget ( or wants to avoid discussion of), so many commercial properties are now underwater (worth less than their mortgages), that foreclosures of commercial properties are likely for years to come, say many experts who have studied the matter.
I think it is nonsense to even suggest any real recovery in the commercial sector within only a year or so.
But check back with me in, say, 2015, and we can discuss it further than.