NAR August 2009 Commercial Real Estate Outlook

NAR has put out its August outlook for commercial real estate. Again, not much new here, but I post these because investment in real estate follows a bit of a herd mentality; so as long as the news is bad across the board, you can generally expect people to sit on the sidelines and wait for lower prices. Rents acted in the same way over the past few years. People were raising rents because their brokers and proformas told them to, not because the fundamental drivers were there. And once a few big landlords started raising their rents and managed to sign some deals, the market began to take off.

Of course we now know that much of the increases in price and rents were built upon dreams and not reality, but nonetheless, it’s important to see what all the various camps are saying, so we’ll continue to post “market assessments” from various outfits from time to time. And as long as tenants continue to read articles about falling rents, and the distress in commercial real estate, they will generally also continue to hold out from doing longer terms deals in the hopes that they will be able to get even better deals in the not so distant future.

Anyhow, the general NAR outook is that….

Commercial real estate will continue to face negative absorption, increasing vacancies for all property types and declining rents. Commercial debt continues to pose a major threat. Extension of TALF funds for commercial lending should provide liquidity, particularly in the CMBS market. Investments may rise due to distressed properties and lower prices.

and regionally…

The West (28.9 points) is in the worst condition of any other region in the country. Its overall market is suffering from the largest decline in asking rents, the lowest level of leasing activity, the highest level of available sublease space, the deepest level of landlord concessions, and higher vacancy rates. The short term outlook for the West is the lowest of all regions. The South (39.6 points) is hanging on as the region with the greatest overall points and has the highest performing submarket—the West South Central—which scored 49.1 points. The Northeast (42.2 points) led all regions with stronger numbers in most categories this quarter. Translated, the Northeast posted slightly higher leasing activity, less rent decline, less sublease space, and fewer concessions than the other regions. The Mid-West (34.9 points) is not quite as bad as the West, but comes in at a close second to many of the woes affecting the West. Investment prices continued their decline, producing a strong buyer’s market. The region appears to be more negatively affected by the local economy.

Similar Posts:

• Cap Rates Still Hiking According to CoStar and Korpacz Survey
• Decline Continues in Moody’s/REAL Commercial Real Estate Index: April Down 8.6%
• Moody’s Commercial Property Price Index Posts Large Declines
• The Decline Continues: Q1 2009 NCREIF NPI Numbers Released
• Moody’s: CRE Prices Will Continue To Fall

Comments

Wes Brown September 9, 2009

I am the owner broker for CRB Group. For almost a year there has been almost not activity with selling listings for negotiating leases. That is until recently. Finally there have been a number of serious inquires. At least in the Sacramento area, it looks like some tenants and investors and getting in the game.

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