Commercial Real Estate Easing in Economic Slowdown

According to an article on 06/18/08 by Walter Molony, a writer for the Commercial Real Estate Outlook division of the National Association of Realtors, the commercial real estate market is starting to feel the affects of the credit crunch:

Commercial real estate vacancies are trending up modestly, while investment has dropped sharply in the wake of the credit crunch, according to preliminary information for the latest COMMERCIAL REAL ESTATE OUTLOOK* of the National Association of Realtors®.NAR Chief Economist Lawrence Yun said economic weakness is impacting commercial real estate. “Although the supply-demand fundamentals are broadly favorable in most commercial real estate markets, vacancy rates are rising modestly and rent gains are slowing,” he said. “Slow economic growth is lowering demand for commercial space, mostly in the office and industrial sectors. Despite the slowdown, the commercial real estate market is in much better shape compared to conditions during the 2001 recession.”
Patricia Nooney of St. Louis, chair of the Realtors® Commercial Alliance Committee, said credit has been a problem. “Tight credit availability has significantly slowed the volume of commercial real estate transactions,” she said. “Even so, institutional investors, along with foreign investors who are encouraged by the drop in the dollar, remain active in the current market. Because conditions are so varied across the country, we recommend investors or businesses looking for space consult with Realtors® in their area who specialize in commercial real estate.”Investment in commercial real estate during the first four months of 2008 was $48.2 billion, down 69.5 percent from $157.8 billion during the same period in 2007 when the credit markets were functioning normally; those totals do not include transactions valued at less than $5 million or investments in the hospitality sector. 

The NAR forecast in four major commercial sectors analyzes quarterly data for various tracked metro areas. The sectors are the office, industrial, retail and multifamily markets. Historic data were provided by Torto Wheaton Research and Real Capital Analytics.

 

Read entire commercial market report by Walter Molony where he discusses the outlook for the following markets: office, industrial, retail, and multifamily.

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