Commercial Real Estate sees improvement, but a long road is still ahead
Positive 2011 Outlook for Commercial Real Estate
With CAP rates on many Class A commercial property reaching levels we haven’t seen since the early 2000s, it no wonder some major commercial markets are beginning to see multiple bids. This is even truer for many multi-family properties, where for many parts of the country we have been seeing an increase in rental demand. However, the same can also be found in many commercial office and retail markets. Even though in many cities occupancy rates have dropped, prices have dropped even more. In many instances, this decrease in sales price has allowed for CAP rates in excess of 10%, even with the decreases in occupancy rates.
Although this increase in activity is step in the right direction, there are still several things that need to occur before we start to see pre-bust activity.
The first and most critical step that needs to occur is a recovery in employment. Right now major corporations are seeing record profits, and are currently sitting on record levels of liquid funds. In addition to large corporations, an additional $30 billion in federal funds were lent to small business in the fall of 2010 in an effort to encourage growth in company hidings. However, thus far we haven’t seen this increase in record profits and cash reserves translate into growth in employment. This is primarily due to the uncertainty about the pace of the recovery, and whether or not the worst is truly over. In addition, there are still concerns amongst small businesses as to how new regulations and health care are going to effect their bottom line.
Although it is uncertain how long it will be before we start to see an increase in the rate of new job creations, it doesn’t appear that this has had a major impact on the American consumer. Research shows that consumer spending (mainly in retail) has increased to levels we were seeing in 2008. This increase has led to a slow down in the retail vacancy rates, and has even appeared to cause a slowdown in vacancies and an increase in rental rates in the industrial manufacturing sector.
Related Posts:
Commercial Real Estate: Investors are Back
Commercial Real Estate: Alternative Financing
Buying Commercial Foreclosures
Turn Your Vacant Commercial Space into a Tax Write Off
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my website: www.SellingHomesinReno.com
Joshua Talayka
NAR designated: Short Sale & Foreclosure Resource
Chase International
Office: 775 850 5900
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Reno, Nevada (NV) 89521
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