Our firm owns and manages a number of professional office buildings within our market and was clearly aware of a market decline by the "9/11" event. Industrial was already dead within Michigan and multiple family properties and mobile home communities were struggling. These conditions persisted and even tightened up until the end of the first quarter 2008 when the melt-down of the sub-prime mortgage markets lead the stock market and rest of the country into a full-blown recession.
Wall street now admits that the recession started sometime early last year, but any commercial real estate professional could have told you that - they're just asking the wrong people.
With reports now stating that the next wave of sub-prime meltdowns will not peak until the end of 2009 and most likely will last through mid-2010, it's now clear to everyone that this will not be your periodic run-of-the-mill recession; especially with the amount of corporate cut-backs, company failures, employee layoffs, and other similar pressures (i.e. the collapse of the American automotive industry) preventing the market from restarting. And when you stop to think that the recent $300,000,000 in Federal bailout funding still has not managed to thaw the current banking freeze, one has to wonder just what it will take to right the ship.
Regardless of what the experts are saying, I think its pretty safe to believe that the current market condition could easily last another 18 to 24 months or so. Considering the amount of money that the Fed has already advanced, not to mention what other incentives may still be coming, I believe that our economic recovery, at least here in Michigan, will be a very slow climb out. More importantly, it will take generations to payback these astronomical amounts, which will act as an anchor to hold back our entire economic outlook even during stronger growth periods.
Thus the term "New Normal". The commercial realty firms, agents and developers that will ultimately survive this condition will not rely on business as usual, but will take advantage of this condition and will build their stategies upon the new opportunities emerging in the market. Yes, this may be the biggest paradigm shift that we will ever see within our lifetimes and I am guessing that economist and historians will be writing about this for years. There winners and losers - where will you land? Do you have a plan?