Fortunately Texas is not seeing the brunt of the decline. We have managed to stay close to normal. A direct result of not over-inflating pricing and having realistic expectations for resale and investment performace.
- Erik
Commercial real estate recovery not seen until 2011
By Tom Daykin of the Journal Sentinel
Posted: Jan. 4, 2010
Land and Space
Journal Sentinel business reporter Tom Daykin blogs about commercial real estate and development
The commercial real estate industry, faced with filling empty offices and stores while the nation's unemployment rate hovers above 10%, won't begin its recovery until 2011, according to a forecast released Monday.
But, at least the industry's decline in 2010 will be less severe than its drop in 2009, according to the forecast by Grubb & Ellis Co., a national real estate services firm that includes Brookfield-based Apex Commercial Inc. among its affiliates.
"The national economy has begun a slow and cautious recovery, but the labor market, which often lags the broader economy, will turn around only gradually with sustained improvement unlikely before the second half of 2010. Because commercial real estate lags the labor market, it still has a ways to go before reaching its own low point," said Bob Bach, the firm's senior vice president and chief economist.
"The good news is that the freefall we saw in 2009 is over and the future is more certain, giving owners and users of real estate the confidence to begin making decisions again," Bach said in a statement.
The national office market's vacancy rate is expected to reach 18.5% to 19% by the end of 2010, the highest since Grubb & Ellis began tracking the national market in 1986. Slow job growth will delay improvement in the office market, Bach said.
The national industrial vacancy rate is expected to reach 11.4% by the end of 2010, compared with 10.7% at the end of 2009. But economic indicators that generate demand for industrial space, such as global trade and manufacturing activity, saw upticks in late 2009. Those factors, along with the weakness of the dollar, indicate that the vacancy rate could begin to decrease by the end of 2010.
Meanwhile, Grubb & Ellis expects the national retail vacancy rate to continue to climb. Recovery in retail will be weak in 2010, but it will begin to generate demand for retail real estate starting in 2011.
Finally, the apartment market continues to face negative trends, including the growing number of unsold condominiums and homes being offered for rent. In the longer term, apartments will benefit from the decline of homeownership rates, as well as increased volume of 20- to 29-year-old apartment seekers as the boomers' kids move out on their own, the forecast says.
Bach's report didn't mention Milwaukee. The local commercial real estate market tends to fare somewhat better than the national scene during recessions. That's mainly because Milwaukee usually doesn't see as much overbuilding during the good times.
Indeed, even though the Milwaukee area's office vacancy rate is 19.7%, much of that empty space is concentrated in older office buildings, and demand is building for a new downtown office building, according to some local brokers.
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