Commercial Real Estate Recovery… are we there yet?
As a commercial real estate broker and small business owner I get a lot of questions about my thoughts on the state of the commercial real estate market, both locally and nationally. The most common question centers on how long the bottoming is going to last, and are we even there yet? My answer has turned upbeat in recent weeks as the positive news keeps coming in about the economy. Not that I wasn’t always optimistic but the answers were somewhat “structured” based on whether I was talking to a seller/landlord or a buyer/tenant. Of course, there is still considerable pain and suffering for many owners, especially if they purchased in the height of the market. So for them, my answers implied that we are at least a few years from experiencing “favorable” conditions that would resemble any kind of “old normal” that they might be accustomed to. On the other hand, for commercial real estate buyers or retail or office tenants we would encourage them to grab the best deal they can, as fast as they can, because the commercial real estate market has presented, what may easily be a generational opportunity for buying or leasing.
Overall I think the real answer to where we are in the commercial real estate cycle has a lot to do with the old buzzwords LOCATION, LOCATION, LOCATION. Whether it be the a major or secondary market , a prime corner versus something second tier, a trophy building or a class C asset the economic influences are going to determine to a degree at what stage of the recovery we are in. Those areas hit the hardest, it would seem, will take the longest to recover but the quality of the asset will play a major role in how that particular property holds up regardless.
If I use my market, Ft.Myers, Naples Florida, which is sitting at 13% unemployment one could make a case for us being in the doldrums for an extended period of time, however, the market is quite active and what a great location. The market is still in a quandary due to oversupply but velocity of absorption is increasing and some of the new construction that has been empty for three plus years is starting to get some movement. On another note, there are national markets that didn’t get hit as hard and they are recovering nicely based on many industry reports. After all, we have been in this mess for over 3 years already, so one would like to believe that the economic indicators are beginning to tell the real story.
Here are a couple of bullet points that got my attention.
- Interest rates still at generational lows
- Unemployment finally moved lower to 9.4%
- Retail sales for December up 5.5%
- 17 consecutive quarters of increased manufacturing
- Bush tax cuts extended and include a payroll tax cut
- Positive discussion coming on deficit reduction and spending cuts
- Potential restructuring of Obamacare
- Very positive corporate earnings reports
- Banks are softening on credit and money is available to lend
- Wall Street is back to positive momentum and restoring people’s wealth
- There is no shortage of money chasing commercial real deals
If you follow the trends one can certainly make a case that we have passed the point of complete collapse and are in a positive uptrend. Yes, we still have considerable issues to contend with but many signs are pointing north. I would say we have passed bottom and are well on our way to recovery in the commercial real estate market.
About Boback Commercial Group
Boback Commercial Group, a full service, commercial real estate company, located in Fort Myers, FL, has over 30 years of professional real estate experience. The company offers services and advice for real estate owners, users and investors, related to Florida commercial property sales and leasing, Florida commercial property and association management, investment properties, asset management, and distressed or foreclosed property workouts for banks. Boback Commercial Group serves the southwest Florida area with a primary focus on commercial real estate in Fort Myers, Cape Coral, Naples, Port Charlotte and the surrounding communities. Please visit our Website at BobackCommercialGroup.com or contact us by telephone at 239-466-7770.
