Economic Aftershock - Commercial Real Estate

By
Real Estate Sales Representative with Coldwell Banker Sky Ridge Realty

I read an interesting article: http://www.time.com/time/magazine/article/0,9171,1952317,00.html in Time Magazine about the commercial real estate industry. While I'm not opposed to selling commercial real estate, I have no experience there. I have been asked on occasion how the economy has effected this market and have had to call on friends for their expert opinions. 

According to this article, the downturn in the commercial side, "The housing bust preceded and precipitated the recession. The commercial bust is an after effect." I found this information very interesting. It all snowballed, lack of consumer spending effected the businesses which in turn effects the commercial buildings. While all of that is very obvious in retrospect, it still didn't seem all that predictable since there was no 100% financing, arm rate nonsense going on in this industry. 

One scary thing here is how we will continue to be effected by record-breaking unemployment rates. The "slow-motion train wreck" of the (predicted) commercial crash will keep us on this downward spiral where people are losing their jobs left and right. 

The article ends with this quote, ""The smart money, and there is plenty on the sidelines, is waiting for the bottom to materialize," says Bonney. It may still be waiting a year from now." Which also concerns me. My residential sales mindset may be effecting my response here, but isn't the bottom defined by the consumer? If you had an idea for a business, one that would create jobs, help the economy, offer hope; etc. can you really afford to wait? And wouldn't you just offer on the building what you would hope it would bottom out at? If everyone with 'smart money' waits for the bottom which is predicted to be several years from now, I think we are going to be in deep(er) trouble. With the media writing articles that basically say it would be investment suicide to buy now, it could scare off the kind of innovators that can turn our country's problems around.

I'd love to hear from others who've got experience in this. How would you advise your clients? Would you tell them to go for it and help them create a bottom or would you do as the article suggests and advise people to wait it out?


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