With high vacancy rates and extremely low prices, the commercial real estate market is going through tough times. For many practitioners and brokerages today, it's more about survival than success.
Commercial real estate has been whacked, NAR Chief Economist Lawrence Yun told an audience of REALTORS® Thursday at the Economic Issues and Commercial Business Issues Forum during the 2010 Midyear Legislative Meetings & Expo. It's been a horrible cycle. Residential [real estate] is coming back, but commercial is just trying to stop the bleeding.
However, a turnaround in commercial real estate may be underway as soon as next year, Yun said. There are indications of improvement in the broader economy - such as rising corporate profits, job creation, and greater availability of credit - that could bode well for the commercial sector. It may be some time before the impact of those developments is felt by commercial practitioners, though.
Commercial real estate lags the economy by about a year, he said. If the economy turned around today, it would be a year from now before commercial recovers.
Some aspects of the commercial market might improve as early as this year. For instance, the financial picture of real estate investment trusts appears to be getting better already. Also, Yun said the number of commercial property transactions may go up this year, even if the other fundamentals remain weak.
It's important to note that a return to peak levels for the commercial sector is still at least a few years away. But by next year, the darkest days may be in the rearview mirror, experts say.