I would rather live my life as if there is a God, and die to find out there isn’t, than live my life as if there isn’t, and die to find out there is!

Monday, January 6, 2014

Will Commercial Real Estate Rebound Soon?

建生邨商場 Kin Sang Estate Commercial Centre
建生邨商場 Kin Sang Estate Commercial Centre (Photo credit: Wikipedia)

I believe it will begin to return to the previous higher levels, but it will be a slow climb back. It won’t be a rocket, more like a floating balloon. What facts do I base my belief upon? Well…

·      * If the Federal Reserve is to be believed, rates will continue to be held low until at least sometime in 2015. That is good news for Commercial Real Estate.

·      * Commercial Real Estate inventory is falling is key markets. That means properties are selling, and if selling, they were priced right. Sellers have realistic expectations.

·       *As financial markets rebound, lenders will want to ramp up their activity. This makes much needed capital available to developers and investors.

·       *Companies who have restructured their workforce as a result of the general economic downturn will be looking for space that fits their current needs. While some of this will be downsizing, there is always those companies who are outgrowing their current space.

·       *Vacancies are slowly decreasing in the Commercial Real Estate Segment. The theory of “supply and demand” makes this a positive factor. However, again, this is slow moving.

·       *One of the positive results of the recent economic downturn is that regulators, city and county, are relaxing their building and zoning restrictions just a bit. Their motivation is to stop loss of tax revenue.

The stock market is at a five or six year high, corporate earnings are getting stronger, bonds are holding their own, and interest rates will remain low for at least the short term. In my opinion, there are clear signals of the Commercial Real Estate segment beginning a rebound.

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