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Commercial Building Slows to Residential's Pace

By
Real Estate Broker/Owner with Affinity Properties, Inc 509937

In 2007, everyone stopped building homes. For that matter, they stopped buying and selling homes, too. They weren't wanted; they weren't needed; and they certainly weren't in the budget. That wasn't the case, however, for commercial structures. Offices, malls, hotels and public institutions continued to be built throughout the year. These buildings seemed to feel very little of the economy's tightening, remaining strong and newly erected while everything else weakened.
   
Unfortunately, that's no longer true.

Current trends show that nonresidential construction is about to hit a standstill. Projects already in the works are tentatively continuing, unsure if they'll have enough funds for completion. And projects only in the planning stages seem to be ultimately doomed. In March, the number of nonresidential starts dropped by 23 percent; hotels dipped 67 percent, offices 28 and stores 18. Since the dip is relatively recent, it could be hoped that this is only temporary, but with the increased difficulty of obtaining a loan, the weak dollar and the high price of building materials, it's doubtful that's true. This won't be turning around any time soon.

That means the economy is only going to get worse. An estimated $250 billion is put into the economy annually by commercial buildings. Without them, there will only be a tighter squeeze - more strain on your wallet. Construction jobs will dwindle even more than they already have, and the real estate market will take yet another hit, making it doubly difficult to stay afloat, whether you are commercial or residential, buyer, seller or builder.

Hopefully, we'll all weather this storm adn come out stronger than we were before the tough times hit.

Joe

Selling a Home in Austin Texas | New Year 2008 Texas Economy Forecast

Robert Henry
R&D Construction - Spokane, WA

Here in Spokane, we've had a sudden rush of commercial construction due to the city's proposed impact fees (up to $75 per sq. ft.) due to take effect in late 2008.  Once those go into effect, I imagine our commercial building will screech to a halt.  Do you feel that the housing market has "bottomed out" in the last few weeks?

May 27, 2008 04:45 PM
Joe Cline
Affinity Properties, Inc - Austin, TX

Hey there Robert. Sorry for the late response. I was out of commission for a few days with the flu, but I'm back in business now. :)


I don't think the market has bottomed out yet.

In the multifamily space for instance, I don't see any balloons, free cable signs, and one month free specials in the lease market. In Austin we have many many condo projects due to complete in the central business district. Some of them are converting to apartments, some completing with lackluster sales numbers. When the next 500-700 units hit the market by the end of the year I think we'll see the bottom.

On the office side, a partnership that I'm working with has 6 office properties on the market for under market and they are selling slowly, but surely. I think so long as we get out of them by the end of the year we'll be good. Although there's something to be said for the recovery that should hopefully follow after we get psychopath out of the whitehouse and get somoene in there who is not GWB.


Here's looking to getting past the downturn and getting back to business!

JOE

May 30, 2008 08:46 AM