CHICAGO, IL, (by Tom Vincent, CCIM) There are a plethora of articles appearing in nearly every commercial real estate publication regarding the industry and the market, and what to expect in 2010 and beyond. I have read many of these articles; most say the same thing, 2010 is not going to be a good year for CRE. One of today’s headlines said that the highest commercial real estate defaults in 18 years are anticipated for 2010. We listened to an economist present his views for CRE in 2010. Dr. Sam Chandan, President and Chief Economist of Real Estate Econometrics and an adjunct professor of real estate at the Wharton School of the University of Pennsylavania, put together an hour-long presentation for Sperry Van Ness advisors and personnel. He believes:
- Though the economy remains fragile, we are beginning to recover from the depression scenario
- The economy will need support the next few years
- There will be some modest growth in spending in 2010
- Multifamily is not faring well as the greatest demographic for renters is in the 21-29 year age range; this group is facing 16% unemployment and living back at home or pursuing advanced degrees
- The real estate sector of the economy has declined sharply from 2007 highs
- The first time home buyer program undercut the industry
- NOI will stabilize over time; last recession it took 4 years to stabilize
- Transaction activity will be primarily concentrated in the REIT sector and private buyers
- Private buyers will be seeking properties in the $1-3,500,000 price range
- Predicts prices with stabilize and credit availability will be more robust
- Retail operations will remain challenging
- Still a disparity between buyers and sellers but the gap is narrowing
- During the savings and loan crisis, troubled assets were put on the market and sold at distressed prices
- Investors waiting for the flood of distressed properties have been disappointed
- FDIC has instituted a variety of programs to avert flooding the market
- Lenders are exercising the extend and pretend option.
Lastly, and most importantly, Dr. Chandan believes the CRE section of the economy will revive with the creation of SUSTAINABLE JOBS.
Tags: 2010, commercial, downturn, economy, predictions, real estate, recession, recovery, REITs, Retail